Top Banner
SHELF PROSPECTUS September 26, 2011 POWER FINANCE CORPORATION LIMITED (Incorporated on July 16, 1986 under the Companies Act, 1956 as a public limited company) Registered Office and Corporate Office: ‘Urjanidhi’, 1, Barakhamba Lane, Connaught Place, New Delhi 110 001, India. Tel: +91 11 2345 6000. Fax: +91 11 2341 2545. Compliance Officer & Company Secretary: Mr. J.S. Amitabh, Tel: +91 11 2345 6000 Fax: +91 11 2345 6285 E-mail: [email protected]. Website: www.pfcindia.com. PUBLIC ISSUE BY POWER FINANCE CORPORATION LIMITED (“COMPANY” OR “ISSUER”) OF ‘LONG TERM INFRASTRUCTURE BONDS’ OF FACE VALUE OF ` [] EACH, IN THE NATURE OF SECURED, REDEEMABLE, NON- CONVERTIBLE DEBENTURES, HAVING BENEFITS UNDER SECTION 80CCF OF THE INCOME TAX ACT, 1961, AS AMENDED, (“BONDS”), UP TO ` 6,900 CRORES * (“ISSUE”). THE BONDS WILL BE ISSUED AT PAR IN ONE OR MORE TRANCHES UP TO ` 6,900 CRORES * , ON THE TERMS AND CONDITIONS AS SET OUT IN SEPERATE TRANCHE PROSPECTUSES FOR EACH SUCH TRANCHE. The Issue is being made under the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (“SEBI Debt Regulations”). * The Issue does not exceed 25% of the incremental infrastructure investment made by the Company during Fiscal 2011. GENERAL RISKS Investors are advised to read the Risk Factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue, including the risks involved. Specific attention of the investors is invited to Risk Factors” on page 8. This document has not been and will not be 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 exchange in India. The Bonds are subject to a statutory lock-in for a minimum period of five years from the Deemed Date of Allotment and no trading market would exist or be established for the Bonds for this period, despite the Bonds being listed ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Shelf Prospectus contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Shelf Prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other material facts, the omission of which makes this Shelf Prospectus as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. CREDIT RATING CRISIL Limited (“CRISIL”) has, by its letter no. SN/FSR/PFC/2011-12/645 dated August 25, 2011 assigned a rating of AAA/Stable (pronounced “Triple A rating with stable outlook”) to the Bonds. Further, ICRA Limited has, by its letter no. D/RAT/2011-2012/P3/19 dated September 7, 2011, assigned a rating of AAA (pronounced triple A) with a ‘Stable’ outlook to the Bonds. 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 assigning rating agency(ies) and should be evaluated independently of any other ratings. For the rationale for these ratings, see Annexure II. PUBLIC COMMENTS The Draft Shelf Prospectus dated September 12, 2011 was filed with the Designated Stock Exchange, pursuant to the provisions of the SEBI Debt Regulations and was open for public comments for a period of seven Working Days, i.e., until 5 p.m. on September 22, 2011 LISTING The Bonds are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”). BSE have given its in-principle listing approval by its letter dated September 22, 2011. The Designated Stock Exchange for the Issue is BSE. Lead Managers to the Issue Registrar to the Issue Debenture Trustee for the Bondholders SBI CAPITAL MARKETS LIMITED* 202, Maker Tower E, Cuffe Parade, Mumbai 400 005, India Tel: +91 (22) 2217 8300; Fax: +91 (22) 2218 8332 Email: [email protected] Investor Grievance Email: [email protected] Website: www.sbicaps.com Contact person: Mr. Puneet Deshpande Compliance Officer: Mr. Bhaskar Chakraborty SEBI Registration No.: INM000003531 ICICI SECURITIES LIMITED ICICI Centre,H.T. Parekh Marg, Churchgate, Mumbai 400 020, India Tel: +91 (22) 2288 2460; Fax: +91 (22) 2282 6580 Email: [email protected] Investor Grievance Email: [email protected] Website: www.icicisecurities.com Contact person: Mr. Manvendra Tiwari Compliance Officer: Mr. Subir Saha SEBI Registration No:INM000011179 KARVY COMPUTERSHARE PRIVATE LIMITED “Karvy House” 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad- 500 034, India Tel: +91 (1600) 3454001 Fax: +91 (40) 23431551 Email: [email protected] Investor Grievance Email: [email protected] Website: www.karvy.com Contact Person: Mr. Murali Krishna SEBI Registration: INR000000221 PNB INVESTMENT SERVICES LIMITED 10, Rakeshdeep Building, Yusuf Sarai, Commercial Complex, Gulmohar Enclave, New Delhi – 110049, India Tel: +91 (11) 49495050 Fax: +91( 11) 41035057 Email: [email protected] Website: www.pnbisl.com Contact Person: Mr. J K Agarwal SEBI Registration No.: IND000000510 ISSUE PROGRAMME ISSUE OPENS ON : [] ISSUE CLOSES ON : [] The subscription list for the Issue shall remain open for subscription during banking hours for the period indicated above, except that the Issue may close on such date as may be decided by the Board. In the event of an early closure of the Issue , the Company shall ensure that notice is provided to the prospective investors through newspaper advertisements, at least three days prior to such earlier date of Issue closure. *The SEBI registration of one of the Lead Managers to the issue, SBI Capital Markets Limited was valid up to July 31, 2011. The application for renewal of the certificate of registration in the prescribed manner has been made by SBI Capital Markets Limited on April 29, 2011, to SEBI, three months before the expiry of the period of the certificate as required under Regulation 9(1) of the SEBI (Merchant Bankers) Regulations, 1992. The approval of SEBI in this regard is currently awaited.
450

Shelf Prospectus

Feb 21, 2015

Download

Documents

Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Shelf Prospectus

SHELF PROSPECTUS September 26, 2011

POWER FINANCE CORPORATION LIMITED (Incorporated on July 16, 1986 under the Companies Act, 1956 as a public limited company)

Registered Office and Corporate Office: ‘Urjanidhi’, 1, Barakhamba Lane, Connaught Place, New Delhi 110 001, India.

Tel: +91 11 2345 6000. Fax: +91 11 2341 2545.

Compliance Officer & Company Secretary: Mr. J.S. Amitabh, Tel: +91 11 2345 6000 Fax: +91 11 2345 6285

E-mail: [email protected]. Website: www.pfcindia.com.

PUBLIC ISSUE BY POWER FINANCE CORPORATION LIMITED (“COMPANY” OR “ISSUER”) OF ‘LONG TERM

INFRASTRUCTURE BONDS’ OF FACE VALUE OF `̀̀̀ [●] EACH, IN THE NATURE OF SECURED, REDEEMABLE, NON-

CONVERTIBLE DEBENTURES, HAVING BENEFITS UNDER SECTION 80CCF OF THE INCOME TAX ACT, 1961, AS AMENDED,

(“BONDS”), UP TO `̀̀̀ 6,900 CRORES* (“ISSUE”). THE BONDS WILL BE ISSUED AT PAR IN ONE OR MORE TRANCHES UP TO `̀̀̀

6,900 CRORES*, ON THE TERMS AND CONDITIONS AS SET OUT IN SEPERATE TRANCHE PROSPECTUSES FOR EACH SUCH

TRANCHE.

The Issue is being made under the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (“SEBI Debt

Regulations”). *The Issue does not exceed 25% of the incremental infrastructure investment made by the Company during Fiscal 2011.

GENERAL RISKS

Investors are advised to read the Risk Factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision,

investors must rely on their own examination of the Issuer and the Issue, including the risks involved. Specific attention of the investors is invited to

“Risk Factors” on page 8. This document has not been and will not be 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 exchange in India. The Bonds are

subject to a statutory lock-in for a minimum period of five years from the Deemed Date of Allotment and no trading market would exist or be

established for the Bonds for this period, despite the Bonds being listed

ISSUER’S ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Shelf Prospectus contains all information with regard

to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Shelf Prospectus is true and correct in all

material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no

other material facts, the omission of which makes this Shelf Prospectus as a whole or any such information or the expression of any such opinions or

intentions misleading in any material respect.

CREDIT RATING

CRISIL Limited (“CRISIL”) has, by its letter no. SN/FSR/PFC/2011-12/645 dated August 25, 2011 assigned a rating of AAA/Stable (pronounced

“Triple A rating with stable outlook”) to the Bonds. Further, ICRA Limited has, by its letter no. D/RAT/2011-2012/P3/19 dated September 7, 2011,

assigned a rating of AAA (pronounced triple A) with a ‘Stable’ outlook to the Bonds. 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 assigning rating

agency(ies) and should be evaluated independently of any other ratings. For the rationale for these ratings, see Annexure II.

PUBLIC COMMENTS

The Draft Shelf Prospectus dated September 12, 2011 was filed with the Designated Stock Exchange, pursuant to the provisions of the SEBI Debt

Regulations and was open for public comments for a period of seven Working Days, i.e., until 5 p.m. on September 22, 2011

LISTING

The Bonds are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”). BSE have given its in-principle listing approval by its letter

dated September 22, 2011. The Designated Stock Exchange for the Issue is BSE.

Lead Managers to the Issue Registrar to the Issue Debenture Trustee for the

Bondholders

SBI CAPITAL MARKETS LIMITED*

202, Maker Tower E, Cuffe Parade,

Mumbai 400 005, India

Tel: +91 (22) 2217 8300;

Fax: +91 (22) 2218 8332

Email: [email protected]

Investor Grievance Email:

[email protected]

Website: www.sbicaps.com

Contact person: Mr. Puneet Deshpande

Compliance Officer: Mr. Bhaskar

Chakraborty

SEBI Registration No.: INM000003531

ICICI SECURITIES LIMITED

ICICI Centre,H.T. Parekh Marg,

Churchgate, Mumbai 400 020, India

Tel: +91 (22) 2288 2460;

Fax: +91 (22) 2282 6580

Email:

[email protected]

Investor Grievance Email:

[email protected]

Website: www.icicisecurities.com

Contact person: Mr. Manvendra Tiwari

Compliance Officer: Mr. Subir Saha

SEBI Registration No:INM000011179

KARVY COMPUTERSHARE

PRIVATE LIMITED

“Karvy House” 46, Avenue 4,

Street No. 1, Banjara Hills,

Hyderabad- 500 034, India

Tel: +91 (1600) 3454001

Fax: +91 (40) 23431551

Email: [email protected]

Investor Grievance Email:

[email protected]

Website: www.karvy.com

Contact Person: Mr. Murali Krishna

SEBI Registration: INR000000221

PNB INVESTMENT

SERVICES LIMITED

10, Rakeshdeep Building,

Yusuf Sarai, Commercial

Complex, Gulmohar Enclave,

New Delhi – 110049, India

Tel: +91 (11) 49495050

Fax: +91( 11) 41035057

Email: [email protected]

Website: www.pnbisl.com

Contact Person: Mr. J K Agarwal

SEBI Registration No.:

IND000000510

ISSUE PROGRAMME

ISSUE OPENS ON : [●] ISSUE CLOSES ON : [●]

The subscription list for the Issue shall remain open for subscription during banking hours for the period indicated above, except that the Issue may close

on such date as may be decided by the Board. In the event of an early closure of the Issue , the Company shall ensure that notice is provided to the

prospective investors through newspaper advertisements, at least three days prior to such earlier date of Issue closure.

*The SEBI registration of one of the Lead Managers to the issue, SBI Capital Markets Limited was valid up to July 31, 2011. The application for renewal

of the certificate of registration in the prescribed manner has been made by SBI Capital Markets Limited on April 29, 2011, to SEBI, three months before

the expiry of the period of the certificate as required under Regulation 9(1) of the SEBI (Merchant Bankers) Regulations, 1992. The approval of SEBI in

this regard is currently awaited.

Page 2: Shelf Prospectus

TABLE OF CONTENTS

SECTION I – GENERAL 1

DEFINITIONS AND ABBREVIATIONS 1

CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA

AND CURRENCY OF PRESENTATON

6

FORWARD LOOKING STATEMENTS 7

SECTION II - RISK FACTORS 8

SECTION III – INTRODUCTION 30

THE ISSUE 30

SELECTED FINANCIAL INFORMATION 32

GENERAL INFORMATION 38

CAPITAL STRUCTURE 42

OBJECTS OF THE ISSUE 45

STATEMENT OF TAX BENEFITS 46

SECTION IV - ABOUT THE COMPANY 49

INDUSTRY OVERVIEW 49

OUR BUSINESS 59

REGULATIONS AND POLICIES 80

HISTORY AND CERTAIN CORPORATE MATTERS 91

MANAGEMENT 102

STOCK MARKET DATA FOR OUR EQUITY SHARES/DEBENTURES 113

FINANCIAL INDEBTEDNESS 115

SECTION V – LEGAL AND OTHER INFORMATION 126

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS 126

OTHER REGULATORY AND STATUTORY DISCLOSURES 130

SECTION VI – ISSUE RELATED INFORMATION 133

ISSUE STRUCTURE 133

TERMS OF THE ISSUE 135

PROCEDURE FOR APPLICATION 149

SECTION VII - MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF THE

COMPANY

156

SECTION VIII – OTHER INFORMATION 170

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 170

DECLARATION 171

ANNEXURE I FINANCIAL STATEMENTS

ANNEXURE II CREDIT RATINGS

ANNEXURE III STOCK MARKET DATA FOR DEBENTURES

ANNEXURE IV LIST OF TOP 10 NON-CONVERTIBLE DEBENTURE/BONDHOLDERS

Page 3: Shelf Prospectus

1

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

This Shelf Prospectus uses certain definitions and abbreviations which, unless the context indicates or implies

otherwise, have the meaning as provided below. References to statutes, rules, regulations, guidelines and policies will

be deemed to include all amendments and modifications notified thereto.

Company Related Terms

Term Description

“Issuer”, ‘PFC”, “our Company”,

or “the Company”, or “the

Corporation”

Power Finance Corporation Limited, a public limited company incorporated

under the Companies Act, 1956.

“We”, or “us”, “our” or “Group” Power Finance Corporation Limited and its Subsidiaries, PFC Green Energy

Limited, PFC Consulting Ltd., Chhattisgarh Surguja Power Ltd., Coastal

Karnataka Power Limited, Coastal Maharashtra Mega Power Limited, Orissa

Integrated Power Limited, Coastal Tamil Nadu Power Limited, Sakhigopal

Integrated Power Company Limited, Ghogarpalli Integrated Power Company

Limited, Tatiya Andhra Mega Power Ltd., Nagapattinam-Madhugiri

Transmission Company Limited and PFC Capital Advisory Services Limited, and

its joint ventures and associates, on a consolidated basis.

Articles/ Articles of

Association/AoA

Articles of Association of our Company

Board/ Board of Directors Board of Directors of our Company

Equity Shares Equity Shares of our Company of face value ` 10 each

Memorandum/Memorandum of

Association/MoA

Memorandum of Association of our Company

PFCCL PFC Consulting Limited

PFCGEL PFC Green Energy Limited

Registered Office and Corporate

Office

The registered office and corporate office of our Company, situated at

‘Urjanidhi’, 1, Barakhamba Lane, Connaught Place, New Delhi- 110 001, India

RoC Registrar of Companies, National Capital Territory of Delhi and Haryana

Statutory Auditors/Auditors Raj Har Gopal & Co. and N. K. Bhargava & Co., the statutory auditors of our

Company

Subsidiaries PFC Green Energy Limited, PFC Consulting Ltd., Chhattisgarh Surguja Power

Ltd., Coastal Karnataka Power Limited, Coastal Maharashtra Mega Power

Limited, Orissa Integrated Power Limited, Coastal Tamil Nadu Power Limited,

Sakhigopal Integrated Power Company Limited, Ghogarpalli Integrated Power

Company Limited, Tatiya Andhra Mega Power Ltd., Nagapattinam-Madhugiri

Transmission Company Limited and PFC Capital Advisory Services Limited.

Issue Related Terms

Term Description

Allotment/ Allot/ Allotted The issue and allotment of the Bonds to the successful Applicants,

pursuant to the Issue.

Allottee A successful Applicant to whom the Bonds are allotted pursuant to the Issue

Applicant A Resident Individual or an HUF who applies for issuance of Bonds pursuant to

the terms of the relevant tranche prospectus and Application Form

Application Amount The aggregate value of the Bonds applied for, as indicated in the

Application Form

Application Form The form in terms of which the Applicant shall make an offer to subscribe to the

Bonds and which will be considered as the application for Allotment of Bonds in

terms of tranche prospectus

Application Interest Interest paid on application money in a manner as more particularly

detailed in “Terms of the Issue – Application Interest” on page 139.

Banker(s) to the Issue/ Escrow

Collection Bank(s)

The banks which are clearing members and registered with SEBI with whom the

Escrow Account will be opened and in this case being State Bank of India, HDFC

Bank Limited, IDBI Bank Limited, ICICI Bank Limited, Kotak Mahindra Bank

Limited, Axis Bank Limited, Indusind Bank and Dhanlaxmi Bank Limited.

Page 4: Shelf Prospectus

2

Bond Certificate(s) Physical Certificate issued to the Bondholder(s) pursuant to Allotment

Bondholder(s) Any person holding the Bonds and whose name appears on the beneficial owners

list provided by the Depositories or whose name appears in the Register

of Bondholders maintained by the Issuer

Bonds Long term infrastructure bonds, in the nature of secured, redeemable, non-

convertible debentures of the Company of face value of ` [●] each, having

benefits under section 80CCF of the Income Tax Act

BSE Bombay Stock Exchange Limited

Buyback Amount The amount specified as buyback amount for the Bonds under “Terms of the

Issue” on page 135

Buyback Date One date, being the date falling [●] years and one day from the Deemed Date of

Allotment, as defined in the respective tranche prospectus(es)

Buyback Intimation Period The period beginning not more than nine months prior to the Buyback Date and

ending not later than six months prior to the Buyback Date

Consolidated Bond Certificate The certificate issued by the Issuer to the Bondholder for the aggregate

amount of the Bonds that are applied in physical form or rematerialized and

held by such Bondholder

CRISIL CRISIL Limited

Debenture Trust Deed Trust deed to be entered into between the Debenture Trustee and the

Company, within three months from the Deemed Date of Allotment

Debenture Trustee/ Trustee Trustee for the Bondholders in this case being PNB Investment Services Limited

Deemed Date of Allotment The Deemed Date of Allotment shall be the date as may be determined

by the Board of the Company and notified to the Designated Stock Exchange

Designated Date The date on which Application Amounts are transferred from the

Escrow Account to the Public Issue Account or the Refund Account, as

appropriate, following which the Board of Directors shall Allot the Bonds

to the successful Applicants, provided that the sums received in respect of the

Issue will be kept in the Escrow Account up to this date

Designated Stock Exchange BSE

Draft Shelf Prospectus This draft shelf prospectus dated Septemeber 12, 2011 filed by the Company

with the Designated Stock Exchange in accordance with the provisions of

SEBI Debt Regulations for public comments

Escrow Account Account opened with the Escrow Collection Bank(s) and in whose favour

the Applicants will issue cheques or drafts, in respect of the Application

Amount when submitting an Application

Escrow Agreement Agreement dated September 21, 2011 to be entered into by the Company, the

Registrar to the Issue, the Lead Managers and the Escrow Collection

Bank(s) for collection of the Application Amounts and where applicable,

refunds of the amounts collected from the Applicants on the terms and

conditions thereof

I-Sec ICICI Securities Limited

ICRA ICRA Limited

Issue Public issue of the Bonds, in one or more tranches, for an amount up to

` 6,900 crore, which does not exceed 25% of the incremental infrastructure

investment made by the Company in Fiscal 2011.

Issue Closing Date As mentioned in the respective Tranche Prospectus

Issue Opening Date As mentioned in the respective Tranche Prospectus

Issue Period The period between the Issue Opening Date and the Issue Closing Date inclusive

of both days, during which prospective Applicants may submit their Application

Forms

Lead Managers SBI Capital Markets Limited and ICICI Securities Limited

Lock-in Period Five years from the Deemed Date of Allotment

Market / Trading Lot One Bond

Notification Notification No. 50/2011 F.No. 178/43/2011-SO(ITA 1) dated September 9,

2011 issued by the Central Board of Direct Taxes, MoF

NSE National Stock Exchange of India Limited

Public Issue Account An account opened with the Banker(s) to the Issue to receive monies from

the Escrow Accounts for the Issue on the Designated Date

Prospectus The Shelf Prospectus together with respective tranche Prospectus(es) shall

constitute “the Prospectus”

Page 5: Shelf Prospectus

3

Record Date Date falling 15 days prior to the date on which interest or the Maturity

Amount is due and payable

Refund Account The account opened with the Refund Bank(s), from which refunds, if any, of the

whole or part of the Application Amount shall be made

Refund Bank As mentioned in the respective Tranche Prospectus

Refund Interest Interest paid on Application Amount in a manner as more particularly detailed in

“Terms of the Issue – Refund Interest ”on page 139

Register of Bondholders

The register of Bondholders maintained by the Issuer in accordance with

the provisions of the Companies Act and as more particularly detailed in

“Terms of the Issue – Register of Bondholders” on page 137

Registrar to the Issue or

Registrar

Karvy Computershare Private Limited

Resident Individual An individual who is a person resident in India as defined under the

Foreign Exchange Management Act, 1999

SBI Caps SBI Capital Markets Limited

Security The Bonds issued by the Company will be secured by creating a charge on the

book debts of the company along with identified immovable property by an first

charge/pari pasu charge, as may be agreed between the Company and the

Debenture Trustee, pursuant to the terms of the Debenture Trust Deed.

Series 1 Bonds The ` [●], [●] percent, non-cumulative Bonds due [●] Series 2 Bonds The ` [●], [●] percent, cumulative Bonds due [●] Series 3 Bonds The ` [●], [●] percent, non-cumulative Bonds due [●] Series 4 Bonds The ` [●], [●] percent, cumulative Bonds due [●]

Shelf Limit

The maximum amount that can be raised under the Shelf Prospectus

(i.e. ` 6,900 Crores)

Stock Exchanges BSE & NSE Tripartite Agreements Agreements entered into between the Issuer, Registrar and each of the

Depositories under the terms of which the Depositories agree to act as

depositories for the securities issued by the Issuer.

Working Days All days excluding Saturdays, Sundays or a public holiday in India or at

any other payment centre notified in terms of the Negotiable Instruments Act,

1881

Conventional and General Terms or Abbreviations

Term/Abbreviation Description/ Full Form

Act/ Companies Act Companies Act, 1956

ADB Asian Development Bank

AGM Annual General Meeting

AS Accounting Standards as notified under Companies Act

CBDT Central Board of Direct Taxes

CDSL Central Depository Services (India) Limited

CRAR Capital to Risk Assets Ratio

Debt Listing Agreement The listing agreement for listing of debt securities on the BSE.

DIN Director Identification Number

DoEA Department of Economic Affairs, Ministry of Finance, Government of India

DoFS Department of Financial Services, Ministry of Finance, Government of India

Depository(ies) CDSL and NSDL

Depositories Act Depositories Act, 1996

DP/ Depository Participant Depository Participant as defined under the Depositories Act, 1996

DRR Debenture Redemption Reserve

DTC Direct Tax Code

FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act, 1999

FII Foreign Institutional Investor (as defined under the SEBI (Foreign

Institutional Investors) Regulations, 1995), registered with the SEBI under

applicable laws in India

FIMMDA Fixed Income Money Markets and Derivatives Association of India

Financial Year/ Fiscal/ FY Period of 12 months ended March 31 of that particular year

GDP Gross Domestic Product

Page 6: Shelf Prospectus

4

GoI or Government Government of India

ICAI Institute of Chartered Accountants of India

IFRS International Financial Reporting Standards

Income Tax Act Income Tax Act, 1961

MoP Ministry of Power, GoI

RBI Reserve Bank of India

Term/Abbreviation Description/ Full Form

India Republic of India

Indian GAAP Generally accepted accounting principles followed in India

IT Information technology

LIBOR London Inter-Bank Offer Rate

MoF Ministry of Finance, GoI

MCA Ministry of Corporate Affairs, GoI

NBFC Non Banking Finance Company, as defined under applicable RBI guidelines

NECS National Electronic Clearing System

NEFT National Electronic Fund Transfer

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

NRI Non Resident Indian

p.a. Per annum

PAN Permanent Account Number

PAT Profit After Tax

PFI Public Financial Institution, as defined under Section 4A of the Companies Act

PMDO Pooled Municipal Debt Obligation

PPP Public Private Partnership

RBI Reserve Bank of India

` or Rupees or Indian Rupees The lawful currency of India

RTGS Real Time Gross Settlement

SARFAESI

Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002

SEBI Securities and Exchange Board of India

SEBI Act SEBI Act, 1992

SEBI Debt Regulations SEBI (Issue and Listing of Debt Securities) Regulations, 2008

Business / Industry Related Terms

Term/Abbreviation Description/ Full Form

ADB Asian Development Bank

ALCO Asset Liability Management Committee

APDRP Accelerated Power Development and Reform Program

AT&C Aggregate technical and commercial losses

CAGR Compounded Annual Growth Rate

CDM Clean Development Mechanism

CEA Central Electricity Authority

DMS Distribution Management System

DPE Department of Public Enterprises, Government of India

ECBs External Commercial Borrowings

FCNR Foreign Currency Non-Resident

IFC Infrastructure Finance Company

IPP Independent Power Producer

ISO International Organization for Standardization

ITP Independent Transmission Project(s)

JNNSM Jawaharlal Nehru National Solar Mission

MNRE Website of the Ministry of New and Renewable Energy

MW Mega Watts

NBFC Non Banking Financial Company

NCDEX National Commodities & Derivatives Exchange Limited

NHPC NHPC Limited

Page 7: Shelf Prospectus

5

NPAs Non-Performing Assets

NPCIL Nuclear Power Corporation of India Limited

NPEL National Power Exchange Limited

NTPC NTPC Limited

PECAP Power Equity Capital Advisors Private Limited

PEIL Power Exchange India Limited

PSU Public Sector Undertaking

PV Photovoltaic

R-APDRP Restructured Accelerated Power Development and Reform Programme

SEBs State Electricity Boards

SERC State Electricity Regulatory Board(s)

SIA SCADA Implementing agencies

SPU State Power Utilities

SPV Special Purpose Vehicle

TCS Tata Consultancy Services Limited

UMPP Ultra Mega Power Project

USAID United States Agency for International Development

USPP United State Private Placement

Yield Ratio of interest income to the daily average of interest earning assets

Page 8: Shelf Prospectus

6

CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND

CURRENCY OF PRESENTATON

Certain Conventions

All references in this Shelf Prospectus to “India” are to the Republic of India and its territories and possessions.

Financial Data

Unless stated otherwise, the financial data in this Shelf Prospectus is derived from (i) our audited standalone financial

statements, prepared in accordance with Indian GAAP and the Companies Act for the Fiscal 2011, 2010, 2009, 2008

and 2007; and/or (ii) our consolidated financial statements, prepared in accordance with Indian GAAP and the

Companies Act for the Fiscal 2011, 2010 and 2009. In this Shelf Prospectus, any discrepancies in any table between the

total and the sums of the amounts listed are due to rounding off.

The current financial year of the Company commences on April 1 and ends on March 31 of the next year, so all

references to particular “financial year”, “fiscal year” and “Fiscal” or “FY”, unless stated otherwise, are to the 12

months period ended on March 31 of that year.

The degree to which the Indian GAAP financial statements included in this Shelf Prospectus will provide meaningful

information is entirely dependent on the reader‘s level of familiarity with Indian accounting practices. Any reliance by

persons not familiar with Indian accounting practices on the financial disclosures presented in this Shelf Prospectus

should accordingly be limited.

Currency and Unit of Presentation

In this Shelf Prospectus, references to “`” “Rs.”, “Indian Rupees”, “INR” and “Rupees” are to the legal currency of

India and references to “US$”, “USD”, and “U.S. dollars” are to the legal currency of the United States of America,

references to “Euro” and “€” are to the legal currency of the European Union and references to “Yen” and “JPY” are to

the legal currency of Japan. For the purposes of this Shelf Prospectus data has been given in `in Crore. In the Shelf

Prospectus, any discrepancies in any table between total and the sum of the amounts listed are due to rounding off.

Industry and Market Data

Any industry and market data used in this Shelf Prospectus consists of estimates based on data reports compiled by

government bodies, professional organizations and analysts, data from other external sources and knowledge of the

markets in which we compete. These publications generally state that the information contained therein has been

obtained from publicly available documents from various sources believed to be reliable but it has not been

independently verified by us or its accuracy and completeness is not guaranteed and its reliability cannot be assured.

Although we believe the industry and market data used in this Shelf Prospectus is reliable, it has not been

independently verified by us. The data used in these sources may have been reclassified by us for purposes of

presentation. Data from these sources may also not be comparable. The extent to which the industry and market data is

presented in this Shelf Prospectus is meaningful depends on the reader‘s familiarity with and understanding of the

methodologies used in compiling such data. There are no standard data gathering methodologies in the industry in

which we conduct our business and methodologies and assumptions may vary widely among different market and

industry sources.

Exchange Rates

The exchange rates (in `) of the US$, JPY and € as for last five years are provided below:

Source: SBI TT Selling rates

Currency March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011

USD 43.77 40.11 51.45 45.58 45.14

JPY 0.3724 0.4029 0.5265 0.4900 0.5484

Euro 58.34 63.47 68.43 61.31 63.99

Page 9: Shelf Prospectus

7

FORWARD LOOKING STATEMENTS

Certain statements contained in this Draft Shelf Prospectus that are not statements of historical 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 prospects are forward-

looking statements. These forward-looking statements include statements as to our business strategy, revenue and

profitability, new business and other matters discussed in this Shelf Prospectus that are not historical facts. All forward-

looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ

materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual

results to differ materially from our expectations include, among others:

• growth prospects of the Indian infrastructure sector and related policy developments;

• general, political, economic, social and business conditions in Indian and other global markets;

• our ability to successfully implement our strategy, growth and expansion plans;

• competition in the Indian and international markets;

• availability of adequate debt and equity financing at reasonable terms;

• performance of the Indian debt and equity markets;

• changes in laws and regulations applicable to companies in India, including foreign exchange control

regulations in India; and

• other factors discussed in this Shelf Prospectus, including under “Risk Factor” on page 8.

Additional factors that could cause actual results, performance or achievements to differ materially include, but are not

limited to, those discussed under “Our Business” on page 59. The forward-looking statements contained in this Shelf

Prospectus are based on the beliefs of management, as well as the assumptions made by, and information currently

available to, management. Although we believe that the expectations reflected in such forward-looking statements are

reasonable at this time, we cannot assure investors that such expectations will prove to be correct. Given these

uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. If any of these

risks and uncertainties materialize, or if any of our underlying assumptions prove to be incorrect, our actual results of

operations or financial condition could differ materially from that described herein as anticipated, believed, estimated or

expected. All subsequent forward-looking statements attributable to us are expressly qualified in their entirety by

reference to these cautionary statements.

Page 10: Shelf Prospectus

8

SECTION II - RISK FACTORS

You should carefully consider all the information in this Shelf Prospectus, including the risks and uncertainties

described below, and under “Our Business” on page 59 and “Financial Statements”on Annexure I, before making an

investment in the Bonds. The risks and uncertainties described in this section are not the only risks that we currently

face. 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, prospects, results of operations and financial condition. If any of the following or any

other risks actually occur, our business prospects, results of operations and financial condition could be adversely

affected and the price of, and the value of your investment in the Bonds could decline and 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.

In this section, unless the context otherwise requires, a reference to the "Company" is a reference to Power Finance

Corporation Limited and unless the context otherwise requires, a reference to "we", "us" and "our" refers to Power

Finance Corporation Limited and its Subsidiaries, joint ventures and associate companies, as applicable in the relevant

fiscal period, on a consolidated basis.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

1. We have a significant concentration of outstanding loans to certain borrowers, particularly public sector power

utilities, many of which are historically loss-making, and if these loans become non-performing, the quality of

our asset portfolio may be adversely affected. As of March 31, 2011, our single largest borrower accounted for

8.55% (`̀̀̀8510.60 crore) of our total outstanding loans, and our top five and top ten borrowers accounted for, in

the aggregate, 33.49% (`̀̀̀33346.76 crores) and 54.88% (`̀̀̀54651.47 crores), respectively of our total outstanding

loans.

We are a public financial institution focused on the power sector in India, which has a limited number of borrowers

primarily comprising State power utilities ("SPUs") and State electricity boards ("SEBs"), many of which have been

historically loss making. Our past exposure has been, and future exposure is expected to be, concentrated towards these

borrowers. As of March 31, 2011, our state sector, central sector joint sector and private sector borrowers accounted for

64.79%,20.39%,8.03% and 6.80%, respectively, of our total outstanding loans. Historically, public sector utilities have

had a relatively weak financial position and have in the past defaulted on their indebtedness. Consequently, we have had

to restructure some of the loans sanctioned to certain SPUs and SEBs, including rescheduling of repayment terms. In

addition, many of our public sector borrowers, particularly SPUs, are susceptible to various operational risks including

low metering at the distribution transformer level, high revenue gap, high receivables, low plant load factors and high

aggregate technical and commercial ("AT&C") losses, which may lead to further deterioration in the financial condition

of such entities.

As of March 31, 2011, our single largest borrower accounted for 8.55% of our total outstanding loans, and our top five

and top ten borrowers accounted for, in the aggregate, 33.49% and 54.88%, respectively, of our total outstanding loans.

In addition, we have additional exposure to these borrowers in the form of non-fund based assistance. Our most

significant borrowers are primarily public sector power utilities. Any negative trends or financial difficulties, or an

inability on the part of such borrowers to manage operational, industry and other risks applicable to such borrowers,

could result in an increase in our non-performing assets ("NPAs") and adversely affect our business, financial condition

and results of operations.

2. We may not be able to recover, or there may be a delay in recovering, the expected value from such security and

collaterals which may affect our financial condition.

Although we endeavor to obtain adequate security or implement quasi-security arrangements in connection with our

loans, we have not obtained such security or collateral for all our loans. In addition, in connection with certain of our

loans, we have been able to obtain only partial security or have made disbursements prior to adequate security being

created or perfected. There can be no assurance that any security or collateral that we have obtained will be adequate to

cover repayment of our loans or interest payments thereon or that we will be able to recover the expected value of such

security or collateral in a timely manner, or at all. As of March 31, 2011, 62.90% of our outstanding loans were secured

by a charge on the relevant project assets, 14.86% were unsecured (but guaranteed by the relevant State government),

and 22.24% were unsecured.

Page 11: Shelf Prospectus

9

Our loans are typically secured by various movable and immovable assets and/or other collaterals. We generally seek a

first ranking pari passu charge on the relevant project assets for loans extended on a senior basis, while for loans

extended on a subordinated basis, we generally seek to have a second pari passu charge on the relevant project assets.

In addition, some of our loans may relate to imperfect security packages or negative liens provided by our borrowers.

The value of certain kinds of assets may decline due to operational risks that are inherent to power sector projects, the

nature of the asset secured in our favor and any adverse market or economic conditions in India or globally. The value

of the security or collateral obtained may also decline due to an imperfection in the title or difficulty in locating

movable assets. Although several pieces of legislation in India provide for various rights of creditors for the effective

realization of collateral in the event of default, there can be no assurance that we will be able to enforce such rights in a

timely manner, or at all. There could be delays in implementing bankruptcy or foreclosure proceedings. Further,

inadequate security documentation or imperfection in title to security or collateral, requirement of regulatory approvals

for enforcement of security or collateral, or fraudulent transfers by borrowers may cause delays in enforcing such

securities. In addition, certain of our loans have been granted as part of a syndicate, and joint recovery action

implemented by a consortium of lenders may be susceptible to delay. In addition, in the event that any specialized

regulatory agency assumes jurisdiction over a defaulting borrower, actions on behalf of creditors may be further

delayed.

In addition, the RBI has developed a corporate debt restructuring process to enable timely and transparent debt

restructuring of corporate entities that are beyond the jurisdiction of the Board of Industrial and Financial

Reconstruction, the Debt Recovery Tribunal and other legal proceedings. The applicable RBI guidelines contemplate

that in the case of indebtedness aggregating ` 100.00 million or more, lenders for more than 75.0% of such

indebtedness by value and 60.0% by number may determine the restructuring of such indebtedness and such

determination is binding on the remaining lenders. In circumstances where other lenders account for more than 75.0%

of such indebtedness by value and 60.0% by number and they are entitled to determine the restructuring of the

indebtedness of any of our borrowers, we may be required by such other lenders to agree to such debt restructuring,

irrespective of our preferred mode of settlement of our loan to such borrower. In addition, with respect to any loans

made as part of a syndicate, a majority of the relevant lenders may elect to pursue a course of action that may not be

favorable to us. Any such debt restructuring could lead to an unexpected loss that could adversely affect our business,

financial condition, results of operations.

3. We have granted loans to private sector borrowers on a non-recourse or limited recourse basis, which increases

the risk of non-recovery and may adversely affect our financial condition. As of March 31, 2011, `̀̀̀ 6772.27

crore, or 6.80%, of our total loans outstanding as of such date, were to private sector borrowers.

We commenced lending to private sector borrowers in fiscal 1997. As of March 31, 2011, ` 6,772.27 crores, or 6.80%,

of our total loans outstanding as of such date, were to private sector borrowers. Under the terms of our loans to private

sector borrowers, our loans are secured by project assets, and in certain cases, we also obtain additional collateral in the

form of a pledge of shares by the relevant promoter, or sponsor guarantee. We expect to increase our exposure to

private sector borrowers in the future. The ability of such borrowers to perform their obligations under our loans will

depend primarily on the financial condition and results of the relevant projects, which may be affected by many factors

beyond the borrowers' control, including competition, operating costs, regulatory issues and other risks. If borrowers

with non-recourse or limited recourse loans were to be adversely affected by these or other factors and were unable to

meet their obligations, the value of the underlying assets available to repay the loans may become insufficient to pay the

full principal and interest on the loans, which could expose us to significant losses.

4. Our ability to compete effectively is dependent on our ability to maintain a low effective cost of funds; an

inability to do so could have a material adverse effect on our business, financial condition and results of

operations.

Our ability to compete effectively is dependent on our timely access to, and the costs associated with raising capital and

our ability to maintain a low effective cost of funds in the future that is comparable or lower than that of our

competitors. Historically, we have been able to reduce our cost of capital and reliance on commercial borrowings

through issuance of Rupee denominated bonds and loans guaranteed by the GoI. We also benefit from certain tax

benefits extended by the GoI. As a government owned NBFC, loans made by us to Central and State entities in the

power sector are currently exempt from the RBI's prudential lending (exposure) norms that are applicable to other non-

government owned NBFCs. In addition, in respect of certain of our foreign currency borrowings guaranteed by the GoI,

we have been exempted from guarantee fees payable to the GoI, which has also enabled us to reduce our costs of funds.

There can be no assurance that we will continue to benefit from any direct or indirect support from the GoI and any

adverse development in GoI policies may result in an increase in our cost of funds. Following a general decrease in the

level of direct and indirect financial support by the GoI to us in recent years, we are fundamentally dependent upon

Page 12: Shelf Prospectus

10

funding from the equity and debt markets and commercial borrowings and are particularly vulnerable in this regard

given the growth of our business. The market for such funds is competitive and there can be no assurance that we will

be able to obtain funds on acceptable terms, or at all. Many of our competitors have greater and cheaper sources of

funding than we do. Further, many of our competitors may have larger resources or balance sheet strength than us and

may have considerable financing resources. In addition, since we are a non-deposit taking NBFC, we may have

restricted access to funds in comparison to banks and deposit taking NBFCs. While we have generally been able to pass

any increased cost of funds onto our customers, we may not be able to do so in the future. If our financial products are

not competitively priced, there is a risk of our borrowers raising loans from other lenders and in the case of financially

stronger SPUs and SEBs and private sector borrowers, the risk of their raising funds directly from the market. Our

ability to raise capital also depends on our ability to maintain our credit ratings in order to access various cost

competitive funding options. We are also dependent on our classification as an IFC which enables us, among other

things, to diversify our borrowings through the issuance of Rupee-denominated infrastructure bonds that offer certain

tax benefits to bondholders and to raise, under the automatic route (without the prior approval of the RBI), ECBs up to

US$500.00 million each fiscal year, subject to the aggregate outstanding ECBs not exceeding 50.0% of our Owned

Funds.

In addition, adverse developments in economic and financial markets or the lack of liquidity in financial markets could

make it difficult for us to access funds at competitive rates. If we are not able to maintain a low effective cost of funds,

we may not be able to implement our growth strategy, competitively price our loans and, consequently, we may not be

able to maintain the profitability or growth of our business, which could have a material adverse effect on our business,

financial condition and results of operations.

5. The escrow account mechanism and the trust and retention account arrangements implemented by us as a

quasi-security mechanism in connection with the payment obligations of our borrowers may not be effective,

which could adversely affect our financial condition and results of operations.

We use escrow accounts as a credit enhancement mechanism for certain of our public sector borrowers that do not meet

certain of our credit risk criteria. As of March 31, 2011, 80.51% of our outstanding loans to State and Central sector

borrowers involved such escrow account mechanism. Similarly, in the case of private sector borrowers, security is

typically obtained through a first priority pari passu charge on the relevant project assets, and through a trust and

retention mechanism.

The escrow account mechanism and the trust and retention account arrangements are effective in the event that revenue

from the end users or other receipts, as applicable, is received by our borrowers and deposited in the relevant escrow

account or trust and retention account. We do not have any arrangement in place to ensure that such revenue is actually

received or deposited in such accounts and the effectiveness of the escrow account mechanism and the trust and

retention account arrangements is limited to such extent. In the event that end users do not make payments to our

borrowers, the escrow account mechanism and the trust and retention account arrangements will not be effective in

ensuring the timely repayment of our loans, which may adversely affect our financial condition and results of

operations. In addition, as we diversify our loan portfolio and enter into new business opportunities, we may not be able

to implement such or similar quasi-security mechanisms or arrangements and there can be no assurance that even if

such mechanisms and arrangements are implemented, that they will be effective.

6. Our borrowers’ insurance of their assets may not be adequate to protect them against all potential losses to

which they may be subject to, which could affect our ability to recover the loan amounts due to us.

Under our loan agreements, where loans are extended on the basis of charge on assets, our borrowers are required to

create a charge on their assets in our favour in the form of hypothecation or mortgage or both. In addition, terms and

conditions of the loan agreements require our borrowers to maintain insurance against damage caused by any disasters

including floods, fires and earthquakes or theft on their charged assets as collateral against the loan granted by us.

However, in most cases our borrowers do not have the adequate insurance coverage, or they have not renewed the

insurance policies or the amount of insurance coverage may be less than the replacement costs of all covered property

and is therefore insufficient to cover all financial losses that our borrowers may suffer. In the event the assets charged in

our favour are damaged, it may affect our ability to recover the loan amounts due to us.

7. We will be impacted by volatility in interest rates in our operations, which could cause our net interest margins

to decline and adversely affect our profitability.

Our operations will be impacted by volatility in interest rates. Interest rates are highly sensitive due to many factors

beyond our control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic

and international economic and political conditions and other factors. Due to these factors, interest rates in India have

Page 13: Shelf Prospectus

11

historically experienced a relatively high degree of volatility.

When interest rates decline, we are subject to greater re-pricing and prepayment risks as borrowers take advantage of

the attractive interest rate environment. In periods of low interest rates and high competition among lenders, borrowers

may seek to reduce their borrowing cost by asking lenders to re-price loans. If we are required to restructure loans, it

could adversely affect our profitability. If borrowers prepay loans, the return on our capital may be impaired as any

prepayment premium we receive may not fully compensate us for the costs of utilizing funds elsewhere. If interest rates

rise we may have greater difficulty in maintaining a low effective cost of funds compared to our competitors, who may

have access to lower cost funds.

8. Our interest income and profitability is dependant on the continued growth of our asset portfolio.

Our results of operations are substantially dependent upon the level of our Net Interest Margins. Income from our

financing activities is the largest component of our total income. Among other factors, volatility in interest rates can

materially and adversely affect our financial performance. In a rising interest rate environment, if the yield on our

interest-earning assets does not increase simultaneously with or to the same extent as our cost of funds, or, in a

declining interest rate environment, if our cost of funds does not decline simultaneously or to the same extent as the

yield on our interest-earning assets, our net interest income and net interest margin would be adversely impacted.

Our net interest margin has decreased from 3.98% in fiscal 2009-10, to 3.86%for the year ended March 31, 2011. Any

such declines in our net interest margins in the future can have a material adverse effect on our business, financial

condition and results of operations.

9. As an NBFC and an IFC, we are required to adhere to certain individual and borrower group exposure limits

prescribed by the RBI. Any change in the regulatory regime may adversely affect our business, financial

condition, results of operations.

We are a systemically important non-deposit taking NBFC and are subject to various regulations by the RBI as an

NBFC. With effect from July 28, 2010, our Company has been classified as an IFC by the RBI, which classification is

subject to certain conditions including (i) a minimum of 75.0% of the total assets of such NBFC should be deployed in

infrastructure loans (as defined under the Non Banking Financial (Non Deposit Accepting or Holding) Companies

Prudential Norms (Reserve Bank) Directions, 2007); (ii) net owned funds of ` 300.00 crore or more; (iii) a minimum

credit rating of "A" or an equivalent credit rating of CRISIL, FITCH, CARE, ICRA or equivalent rating by any other

accrediting rating agencies; and (iv) a capital to risk-weighted asset ratio ("CRAR") of 15.0% (with a minimum Tier I

capital of 10.0%). Tier I capital for such purposes mean Owned Funds as reduced by investment in shares of other

NBFCs and in shares, debentures, bonds, outstanding loans and advances including hire purchase and lease finance

made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, 10.0% of the Owned

Fund and perpetual debt instruments issued by an systemically important non-deposit taking NBFC in each year to the

extent it does not exceed 15.0% of the aggregate Tier I capital of such company as on March 31 of the previous

accounting year.

The maximum exposure ceilings as prescribed in respect of systemically important non-deposit taking NBFC that are

also IFCs under the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms

(Reserve Bank) Directions, 2007 are set out below:

Concentration of credit / investment Loan company Infrastructure Finance Company

Lending ceilings 1.1.1 1.1.2

Lending to any single borrower 15% (+ 5*) 25%

Lending to any single group of borrowers 25% (+ 10*) 40%

Investing ceilings 1.1.3 1.1.4

Investing in shares of a company 15% (+ 5*) 15% (+ 5*)

Investing in shares of a single group of

companies

25% (+ 10*) 25% (+ 10*)

Loans and investment taken together 1.1.5 1.1.6

Lending and investing to single party 25% (+ 5*) 30%

Lending and investing to single group of

parties

40% (+ 10*) 50%

* Additional exposure applicable in case the same is on account of infrastructure loan and/or investment.

Page 14: Shelf Prospectus

12

As of March 31, 2011, the CRAR of our Company was 15.71%. Any inability to continue being classified as an IFC

may impact our growth plans by affecting our competitiveness. As an IFC, we will have to constantly monitor our

compliance with the necessary conditions, which may hinder our future plans to diversify into new business lines. In the

event we are unable to comply with the eligibility condition(s), we may be subject to regulatory actions by the RBI

and/or cancellation of our registration as a systemically important non-deposit taking NBFC that are also IFCs. Any

levy or fines or penalties or the cancellation of our registration as an NBFC or IFC may adversely affect our business,

prospects, results of operations and financial condition. In addition, the RBI has exempted us from prudential exposure

norms in respect of lending to Central and State sector borrowers in the power sector until March 31, 2012. In

compliance with RBI's directive in this regard, we are in the process of formulating and submitting a roadmap (in

consultation with the MoP) to the RBI prior to March 31, 2012, that sets out the manner in which we intend to comply

with such prudential lending norms of the RBI, including additional capitalization. However, if such exemption is not

extended, our business prospects, financial condition and results of operations may be adversely affected.

In addition, our ability to borrow from various banks may be restricted under guidelines issued by the RBI imposing

restrictions on banks in relation to their exposure to NBFCs. For example, according to the RBI, the exposure (both

lending and investment, including off balance sheet exposures) of a bank to a single NBFC should not exceed 10.0% of

the bank's capital funds as per its last audited balance sheet. Banks may, however, assume exposures on a single NBFC

up to 15.0% of their capital funds provided the exposure in excess of 10.0% is on account of funds on-lent by the NBFC

to the infrastructure sector. Further, exposure of a bank to IFCs should not exceed 15.0% of its capital funds as per its

last audited balance sheet, with a provision to increase it to 20.0% if the same is on account of funds on-lent by the IFCs

to the infrastructure sector. Banks may also consider fixing internal limits for their aggregate exposure to the power

sector put together. Although we do not believe such exposure limits have had any adverse effects on our own liquidity,

we believe that individual lenders from whom we currently borrow may not be able to continue to provide us funds.

As we grow our business and increase our borrowings we may face similar limitations with other lenders, which could

impair our growth and interest margins and could therefore have a material adverse effect on our business, financial

condition, results of operations.

10. We are involved in a number of legal proceedings that, if determined against us, could adversely impact our

business and financial condition.

Our Company is a party to various legal proceedings. These legal proceedings are pending at different levels of

adjudication before various courts, tribunals, statutory and regulatory, authorities/ other judicial authorities, and if

determined against our Company, could have an adverse impact on the business financial condition and results of

operations of our Company. For further information relating to outstanding litigation against our Company, see the

section titled "Outstanding Litigation and Material Developments" on page 126 of this Shelf Prospectus. No

assurances can be given as to whether these legal proceedings will be decided in our Company’s favor or have no

adverse outcome, nor can any assurance be given that no further liability will arise out of these claims. Details of the

proceeding that have been initiated against and by our Company and the amounts claimed against and by us in these

proceedings, to the extent ascertainable, are set forth below:

Litigation against and by our Company

Nature of Proceedings Number of Proceedings against the

Company

Amount Involved (`̀̀̀ Crores)*

Writ Petitions 5 Not ascertainable

Income Tax 11 108.60

Consumer Cases 2 0.01

Civil 3 14.03

Total 21 122.64

* The amounts stated do not include the interest claimed or payable.

11. Our contingent liabilities in the event they were to materialize could adversely affect our business, financial

condition, results of operations.

As of March 31, 2011, we had contingent liabilities of `6297.20 crore including non-funded contingent exposure of `

531.38 crore in the form of guarantees and ` 5758.02 crore in the form of letters of comfort issued to borrowers’ banks

in connection with letters of credit and other contingent liabilities ` 7.81 crore. If these contingent liabilities materialize,

our financial condition could be adversely affected.

Page 15: Shelf Prospectus

13

12. If the level of non-performing assets in our loan portfolio were to increase, our financial condition would be

adversely affected.

In the past, our gross NPAs have been as indicated below:

Particulars as of (` crore) As % of total loan assets

March 31, 2009 13.16 0.02%

March 31, 2010 13.16 0.02%

March 31, 2011 230.65 0.23%

The provisioning has been made in terms of prudential norms laid down internally by us. As a government owned

NBFC, loans made by us to Central and State sector borrowers in the Indian power sector are currently exempt from the

RBI's prudential lending (exposure) norms that are applicable to other non-government owned NBFCs. Such

exemption, unless further extended by the GoI, is currently applicable until March 31, 2012. In compliance with RBI's

directive in this regard, we are in the process of formulating and submitting a roadmap (in consultation with the MoP) to

the RBI prior to March 31, 2012, that sets out the manner in which we intend to comply with such prudential norms of

the RBI, including further capitalization. In accordance with our internal prudential norms, in case of government sector

borrowers, we follow a loan-wise NPA determination policy, rather than a borrower-wise NPA determination policy,

which is a regulatory requirement for other non-government sector NBFCs. In the event we are required to follow a

borrower-wise NPA determination policy for our government sector borrowers, our NPA levels may increase

substantially, which may have a material adverse effect on our business, financial condition and results of operations. In

addition, we may, from time to time, amend our policies and procedures regarding asset classification or rescheduling

of our loans, which may also increase our level of NPAs. In addition, we are required to assign risk weight of 20.0% to

the State government guaranteed loans not in default. However, if such loans have remained in default for a period of

more than 90 days, a risk weight of 100.0% is assigned. Our loans made to the private sector are generally consistent

with lending (exposure) norms stipulated by the RBI. For further information on RBI regulations and guidelines

applicable to us, see section titled "Regulations and Policies" on page 80. If RBI provisioning norms were to become

applicable to us, our level of NPAs and provisions with respect thereto could be significantly higher. If we are not able

to prevent increases in our level of NPAs, our business and our future financial condition could be adversely affected.

13. Our statutory auditors have qualified their reports on our audited standalone financial statements for fiscal

2007, 2008, 2009, and 2010 and our audited consolidated financial statements for fiscal 2009 and 2010. There

can be no assurance that there will not be any similar qualifications to our audited standalone and consolidated

financial statements in future periods.

Our statutory auditors have qualified their reports on our audited standalone financial statements for fiscal 2007, 2008,

2009 and 2010. Our statutory auditors have also qualified their reports on our audited consolidated financial statements

for fiscal 2009 and 2010.

Our statutory auditors have qualified their report on our audited standalone and consolidated financial statements for

2010 as reproduced below:

“Power Finance Corporation Limited (The Company) pursuant to the opinion of the Expert Advisory Committee (EAC)

of the Institute of Chartered Accountants of India (ICAI) provided “Deferred Tax Liability” (DTL) on special reserve

created under section 36(1) (viii) of the Income Tax Act, 1961 in fiscal 2005, by charging the profit and loss account

with ` 142.87 crores and debiting the free reserves by ` 745.14 crores (for creating DTL for fiscal 1998 to fiscal 2004).

Since then the Company continued to provide DTL until the end of March 2008 by charging the profit and loss account.

The total amount towards DTL up to March 31, 2008 comes to ` 1,228.38 crores. The Company during the fiscal 2009

reversed the DTL provided in earlier years amounting to ` 1,228.38 crores and also did not provide DTL amounting to

` 291.21 crores (including ` 133.28 crores for fiscal 2009) in the current year, contrary to opinions expressed by the

EAC of the ICAI on two occasions dated November 23, 2004 and May 18, 2006, clarification furnished in July 2009 by

the ICAI on the request of the Comptroller and Auditor General of India and mandatory provisions of Accounting

Standard 22.

In view of the facts and circumstances placed before us, the profits and free reserves of the Company are overstated by

` 774.45 crores and ` 745.14 crores (previous year ` 616.52 crores and ` 745.14 crores), respectively and DTL has

been understated by ` 1,519.59 crores (previous year ` 1,361.66 crores).

Further, the amount of capital considered in the calculation of Capital Risk Adjustment Ratio (CRAR) is overstated to

the above extent. As regards the liability of ` 663.49 crores (previous year ` 908.94 crores) shown as “Interest Subsidy

Fund from GOI” in the balance sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme

Page 16: Shelf Prospectus

14

from the Ministry of Power, Government of India, the Company has estimated the net excess amount of ` 166.25 crores

(previous year ` 283.14 crores) and ` 209.97 crores (previous year ` 44.27 crores) as at March 31, 2010, for the 9th

Five Year Plan period and 10th Plan, respectively.

This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in

assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan

restructuring, pre payment, interest rate reset, etc. Hence, the impact of this excess, if any could not be determined. As

such we are not in a position to express our opinion thereon.”

Our statutory auditors have similarly qualified their reports on our audited standalone and consolidated financial

statements for fiscal 2009 with respect to the non-provision of such deferred tax liability on special reserve created

under Section 36(1)(viii) of the I.T. Act. In addition, our statutory auditors have similarly qualified their reports on (i)

our audited standalone and consolidated financial statements for fiscal 2007, 2008, 2009 and 2010 with respect to the

impact of the excess amount relating to the interest subsidy fund from the GoI under the AG&SP scheme and (ii) our

audited standalone and consolidated financial statements for fiscal 2006, 2007 and 2008 with respect to certain balances

shown under loans, advances and other debits/ credits in so far such balances have not been confirmed, realized,

discharged or adjusted, which are subject to reconciliation.

Our statutory auditors have not qualified their report on our audited standalone and consolidated financial statements

for the financial year ended March 31, 2011. However, there can be no assurance that there will not be any similar

qualifications to our audited standalone and consolidated financial statements in future periods.

14. The power sector in India and our business and operations are regulated by, and are directly and indirectly

dependent on, GoI policies and support, which make us susceptible to any adverse developments in such GoI

policies and support.

We are a Government company operating in a regulated industry, and the GoI, acting through the MoP, exercises

significant influence on key decisions relating to our operations, including with respect to the appointment and removal

of members of our Board, and can determine various corporate actions that require the approval of our Board or

shareholders, including proposed budgets, transactions with other Government companies or GoI entities and agencies,

and the assertion of any claim against such entities. The GoI has also issued directions in connection with the payment

of dividends by Government companies.

The power sector in India and our business and operations are regulated by, and are directly or indirectly dependent on,

GoI policies and support for the power sector. The GoI has implemented various financing schemes and incentives for

the development of power sector projects, and we, like other Government companies, are responsible for the

implementation of, and providing support to, such GoI schemes and initiatives. We may therefore be required to follow

public policy directives of the GoI by providing financing for specific projects or sub-sectors in the public interest

which may not be consistent with our commercial interests. In addition, we may be required to provide financial or

other assistance and services to public sector borrowers and GoI and other government agencies in connection with the

implementation of such GoI initiatives, resulting in diversion of management focus and resources from our core

business interests. Any developments in GoI policies or in the level of direct or indirect support provided to us or our

borrowers by the GoI in these or other areas could adversely affect our business, financial condition, results of

operations.

15. We currently engage in foreign currency borrowing and lending and we are likely to continue to do so in the

future, which will expose us to fluctuations in foreign exchange rates, which could adversely affect our

financial condition.

As of March 31, 2011, we had foreign currency borrowings outstanding of US$ 541.63 million, Japanese Yen

42,797.05 million and Euro 26.66 million, the total of which was equivalent to ` 4962.53 crores, or 5.81% of our total

borrowings. We may continue to be involved in foreign currency borrowing and lending in the future, which will

further expose us to fluctuations in foreign currency rates. Volatility in foreign exchange rates could adversely affect

our business and financial performance. We are also affected by adverse movements in foreign exchange rates to the

extent they impact our borrowers negatively, which may in turn impact the quality of our exposure to these borrowers.

Foreign lenders may also impose conditions more onerous than domestic lenders.

16. Certain of our SEB borrowers have been restructured and we have not yet entered into definitive loan

agreements with such restructured entities, which could affect our ability to enforce applicable loan terms and

related State government guarantees.

Page 17: Shelf Prospectus

15

We have granted long–term loans to various SEBs that were guaranteed by the respective State governments. Pursuant

to certain amendments to the Electricity Act, the respective State governments have restructured these SEBs into

separate entities formed for power generation, transmission and/or distribution activities. As part of such restructuring

process, all liabilities and obligations of the restructured SEBs relating to our loans were transferred, pursuant to a

notification process, to the respective State government, which in turn transferred such liabilities and obligations to the

newly formed State government-owned transmission, distribution and/or generation companies. However, the relevant

notification transferring such liabilities and obligations under our loans necessitates the execution of a transfer

agreement among us, the respective State government and the relevant newly formed transferee entity. We have not yet

executed such transfer agreements with respect to some of these loans. In such circumstances, as the State government

guarantees have not been reaffirmed to cover the debt obligations of such newly formed transferee entities, we may not

be able to enforce the relevant State guarantees in case of default on our loans by such transferee entities. Although we

intend to enter into such transfer agreements to ensure that the terms of our original loan agreements entered into with

the SEBs continue to apply to such transferee entities, there can be no assurance that we will be able to execute such

transfer agreements in a timely manner, or at all. In addition, the relevant State government may not reaffirm such

guarantees with respect to the debt obligations assumed by such restructured transferee entities. There may also be

delay, due to factors beyond our control, with respect to the establishment of relevant trust and retention account

arrangements with such restructured transferee entities. In addition, we have restructured loans sanctioned to certain

SPUs and other SEBs, including rescheduling of repayment terms. Any negative trends or financial difficulties faced by

such SPUs and SEBs could increase our NPAs and adversely affect our business, financial condition and results of

operations.

17. We may incur shortfalls in the advance subsidy received under the Accelerated Generation and Supply

Programme (AG&SP) of the GoI, which may affect our financial condition.

In fiscal 1998, the GoI started the AG&SP, a scheme for providing interest subsidies for various projects. We oversee

and operate this scheme on behalf of the GoI. The scheme subsidises our normal lending rates on loans to state power

utilities. The subsidy is paid in advance directly to us from the central government budget and is to be passed on to the

borrowers against their interest liability arising in future under the AG&SP.

We maintain an interest subsidy fund account on account of the subsidy claimed from the GoI at net present value

which is calculated at certain pre-determined and indicative discount rates, irrespective of the actual repayment

schedule, moratorium period and duration of repayment. The impact of the difference between the indicative discount

rate and period considered at the time of drawal and the actual can be ascertained only after the end of the respective

repayment period in relation to that particular loan. There might be instances where there is a shortfall or a surplus in

the subsidy received from the GoI. In the event of there being a shortfall, we shall have to bear the difference, which

may affect our financial condition.

18. If we are unable to manage our growth effectively, our business and financial results could be adversely

affected.

Our business has grown since we began operations in March 1988. Our total loan assets increased from ` 43,903 Crores

as of March 31, 2007 to ` 99,571.0 Crores as of March 31, 2011, at a CAGR of 23%. We intend to continue to grow our

business, which could place significant demands on our operational, credit, financial and other internal risk controls. It

may also exert pressure on the adequacy of our capitalization, making management of asset quality increasingly

important.

Our asset growth will be primarily funded by the issuance of new debt. We may have difficulty in obtaining funding on

attractive terms. Adverse developments in the Indian credit markets, such as the recent increase in interest rates, may

significantly increase our debt service costs and the overall cost of our funds.

Any inability to manage our growth effectively on favourable terms could have a material adverse effect on our

business and financial performance. Because of our growth and the long gestation period for power sector investments,

our historical financial statements may not be an accurate indicator of our future financial performance.

19. We might not be able to develop or recover costs incurred on our Ultra Mega Power Projects and our failure to

do so may have an adverse effect on our profitability.

We have been appointed as the nodal agency for the development of UMPPs, each with a contracted capacity of 3,500

MW or more. As of March 31, 2011, we have a total of 8 wholly-owned subsidiaries as special purpose vehicles

("SPVs") for these projects. These SPVs have been established to conduct the bidding process in accordance with the

Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees, 2005,

Page 18: Shelf Prospectus

16

as amended. The SPVs undertake preliminary studies and obtain necessary linkages, clearances, land and approvals

including for water, land and power sale arrangements, prior to transfer of the projects to successful bidders. The

objective is to transfer these SPVs to successful bidders, through a tariff based international competitive bidding

process, who will then implement these projects, on payment of development costs incurred by each SPV (including a

success fee). We have and are likely to continue to incur expenses in connection with these SPVs. There may be delays

in the development of such UMPPs or we may be unable to transfer these UMPPs due to various factors, including

environmental issues, resistance by local residents, changes in related laws or regulatory frameworks, or our inability to

find a developer for such projects. For example, development of two UMPPs have been delayed due to delay in receipt

of certain clearances. In addition, we may not be able to fully recover our expenses from the successful bidder, which

may result in financial loss to us, which could adversely affect our financial condition and results of operations.

We have also been appointed as a bid process coordinator for the ITP scheme. The ITP scheme is a tariff based

competitive bidding process for ITPs, similar to that followed for UMPPs, for the development of transmission systems

through private sector participation. We earn revenue from our involvement with ITP projects in a manner similar to the

UMPPs. Four SPVs, were initially incorporated under the ITP scheme, of which one SPV was liquidated in December,

2010 and another SPV was transferred to the successful bidder in March, 2010 and the remaining two were recently

transferred to successful bidders in March 2011. If we are unable to transfer these SPVs to successful bidders in the

future, due to various reasons such as those mentioned above, it may result in financial loss to us, which could adversely

affect our financial condition and results of operations.

20. Our agreements regarding certain of our joint venture arrangements or investments in other companies

contain restrictive covenants, which limit our ability on transfer our shareholding in such ventures.

Our Company has entered into various joint venture arrangements, pursuant to which certain joint venture companies

have been incorporated, namely, National Power Exchange Limited, Energy Efficiency Services Limited and PTC India

Limited (formerly known as Power Trading Corporation of India Limited). Our Company has also entered into a share

subscription and shareholders agreement with the National Stock Exchange and National Commodity & Derivates

Exchange Limited subscribing to the equity shares of Power Exchange India Limited. Furthermore, our Company has

investments in Power Equity Capital Advisors Private Limited and the Small is Beautiful Fund, a venture capital fund

established with the objective to invest in equity and equity like instruments of special purpose vehicles involved in the

development of power projects. For further information see section titled "History and Certain Corporate Matters" on

page 91.

Further, as we hold minority interests in each of these joint venture companies, our joint venture partners will have

control over such joint venture companies (except to the extent agreed under the respective joint venture agreements).

In addition, we have not made provisions for the decline in value of such investments. Under the terms of the relevant

agreements our Company is not permitted to transfer its shareholding in the joint ventures to a third party for a specified

lock-in period and/or with consent of the board of director or the other parties to such agreement/ arrangement. Such

covenants may limit our ability to make optimum use of our investments or exit these joint ventures and thereby

liquidating our investments at our discretion, which may have an adverse impact on our financial condition. In addition,

we cannot assure that we will be able perform or comply with our obligations under the joint venture agreements and

our failure to do so may result in a breach of such agreements, which could affect our rights under these agreements.

Further, the success of these joint ventures is dependent upon the cooperation of our joint venture partners. These joint

ventures are subject to the risk of non-performance by our joint venture partners of their obligations, including their

financial obligations, in respect of the joint venture. Joint venture partners may have business interests or goals that may

differ from our business interests or goals, or those of our shareholders. Any disputes that may arise between our joint

venture partners and us may cause delays in completion or the suspension or abandonment of the venture. In addition,

though our joint ventures confer rights on us, our joint venture partners have certain decision-making rights that may

limit our flexibility to make decisions relating to such business, and may cause delays or losses.

21. We benefit from certain tax benefits available to us as a lending institution. If these tax benefits are no longer

available to us it would adversely affect our business, financial condition, results of operations.

We have received and currently receive tax benefits by virtue of our status as a lending institution, including as a result

of our lending within the infrastructure sector, which have enabled us to reduce our effective tax rate. In fiscal 2008,

2009, 2010 and 2011, our effective tax liability, calculated on the basis of our tax liability as a percentage of profit

before tax, was 27%, 24.7%, 26.6% and 25.37% respectively, compared to statutory corporate tax rates (including

surcharge and cess) of 33.99%, 33.99%, 33.99% and 33.22% in such periods. The availability of such tax benefits is

subject to the policies of the GoI, among other things, and there can be no assurance as to any tax benefits that we will

Page 19: Shelf Prospectus

17

receive in the future. If the laws or regulations regarding these tax benefits are amended, our taxable income and tax

liability may increase, which would adversely impact our financial condition and results of operations.

22. We may make equity investments in power sector in the future and such investments may not be recovered.

We may make equity investments in the power sector either directly or indirectly. As of March 31, 2011, our

investments in equity and equity linked instruments were ` 53.88 crores. The value of these investments depends on the

success and continued viability of these businesses. In addition to the project-specific risks described in the above risk

factors, we have limited control over the operations or management of these businesses. Therefore, our ability to realize

expected gains as a result of our equity interest in a business is highly dependent on factors outside our control. Write-

offs or write-downs in respect of our equity investments may adversely affect our financial performance.

23. The GoI holds a majority of our Equity Shares and can therefore determine the outcome of shareholder voting

and influence our operations.

Our principal shareholder, GoI, holding 73.72% of our Equity Shares, exercises a significant degree of influence over us

and will be able to control the outcome of any proposal that can be passed with a majority shareholder vote. In addition,

the GoI significantly influences our operations through its various departments and policies.

24. We are subject to restrictive covenants under our credit facilities that could limit our flexibility in managing our

business.

There are restrictive covenants in the agreements we have entered into with certain banks and financial institutions for

our short term borrowings, medium term borrowings, long term borrowings and bonds trust deeds. These restrictive

covenants require us to maintain certain financial ratios and seek the prior permission of these banks/financial

institutions for various activities, including, amongst others, selling, leasing, transferring or otherwise disposing of any

part of our business or revenues, effecting any scheme of amalgamation or reconstitution, implementing a new scheme

of expansion or taking up an allied line of business. Such restrictive covenants in our loan and bond documents may

restrict our operations or ability to expand and may adversely affect our business. For details of these restrictive

covenants, see the section titled “Financial Indebtedness” beginning on page 115 of this Shelf Prospectus.

25. Our success depends in large part upon our management team and skilled personnel and our ability to attract

and retain such persons.

Our future performance depends on the continued service of our management team and skilled personnel. We also face

a continuous challenge to recruit and retain a sufficient number of suitably skilled personnel, particularly as we continue

to grow. There is significant competition for management and other skilled personnel in our industry, and it may be

difficult to attract and retain the personnel we need in the future. While, we have employee friendly policies including

an incentive scheme to encourage employee retention, the loss of key personnel may have an adverse affect on our

business, results of operations, financial condition and ability to grow.

26. The power sector financing industry is becoming increasingly competitive and our growth will depend on our

ability to compete effectively and maintain a low effective cost of funds.

We face increasing competition from public and private sector commercial banks in India and from other financial

institutions that provide power sector finance products or services. Many of our competitors have greater and cheaper

resources than we do. Competition in our industry depends on, among other things, the ongoing evolution of

government policies relating to the industry, the entry of new participants into the industry and the extent to which there

is consolidation among banks and financial institutions in India.

Our ability to compete effectively is dependent on our ability to maintain a low effective cost of funds. Our borrowing

costs have been competitive in the past initially due to the sizeable equity contribution by the GoI as a 100% owner, the

availability of tax-free bonds, SLR bonds and loans guaranteed by the GoI and subsequently as a result of our strong

credit ratings. With the growth of our business, we are increasingly reliant on funding from the debt capital markets and

commercial borrowings. The market for such funds is competitive and our ability to obtain funds on acceptable terms

will depend on various factors including our ability to maintain our credit ratings. If we are unable to access funds at an

effective cost that is comparable to or lower than our competitors, we may not be able to offer competitive interest rates

to our borrowers, which could adversely affect our business growth.

Page 20: Shelf Prospectus

18

27. Power projects carry certain risks, which to the extent they materialize could adversely affect our business and

financial performance.

Our business mainly consists of lending to and providing advisory services to power sector projects in India. Power

sector projects carry project-specific as well as general risks. These risks are generally out of our control and include:

• political, regulatory, fiscal, monetary, legal actions and policies that may adversely affect the viability of

projects to which we lend;

• changes in government and regulatory policies relating to the power sector;

• delays in the construction and operation of projects to which we lend;

• adverse changes in demand for, or the price of, power generated or distributed by the projects to which we

lend;

• the willingness and ability of consumers to pay for the power produced by projects to which we lend;

• shortages of, or adverse price developments for, raw materials and key inputs for power production such as

coal and natural gas;

• increased project costs due to environmental challenges and changes in environmental regulations;

• potential defaults under financing arrangements of project companies and their equity investors;

• failure of co-lenders with us under consortium lending arrangements to perform on their contractual

obligations;

• failure of third parties such as contractors, fuel suppliers, sub-contractors and others to perform on their

contractual obligations in respect of projects to which we lend;

• adverse developments in the overall economic environment in India;

• adverse fluctuations in interest rates or currency exchange rates; and

• economic, political and social instability or occurrences such as natural disasters, armed conflict and terrorist

attacks, particularly where projects are located or in the markets they are intended to serve.

To the extent these or other risks relating to the power projects we finance materialize, the quality of our asset portfolio

and our profitability may be adversely affected.

28. Negative trends in the Indian power sector or the Indian economy could adversely affect our business and

financial performance.

Our Company was formed with the objective of extending finance to and promoting Indian power projects and related

activities. For the foreseeable future, we expect to continue to be a sector specific public financial institution with a

focus on the Indian power sector. Any negative trend or financial difficulty in the Indian power sector could adversely

affect our business and financial performance.

We believe that the further development of India’s power sector is dependent on regulatory framework, policies and

procedures that facilitate and encourage private and public sector investment in the power sector. Many of these policies

are evolving and their success will depend on whether they properly address the issues faced and are effectively

implemented.

Additionally, these policies will need continued support from stable and experienced regulatory regimes throughout

India that not only stimulate and encourage the continued investment of capital into power development, but also lead to

increased competition, appropriate allocation of risk, transparency and more efficient power supply and demand

management to the end consumer.

The allocation of capital and the continued growth of the power sector are also linked to the continued growth of the

Indian economy. Since much of the power supply in India has historically been provided by the central and state

governments at a relatively low charge to consumers, the growth of the power industry will be impacted by consumers’

income levels and the extent to which they would be willing to pay or can be induced to pay for power.

If the central and state governments’ initiatives and regulations in the power sector do not proceed to improve the power

sector as intended or if there is any downturn in the macroeconomic environment in India or in the power sector, our

business and financial performance could be adversely affected.

29. Material changes in the regulations that govern us and our borrowers could cause our business to suffer.

We are regulated by the Companies Act and some of our activities are subject to supervision and regulation by statutory

authorities including the MoF, RBI, SEBI and Stock Exchanges. Additionally, our borrowers in the power sector are

Page 21: Shelf Prospectus

19

subject to supervision and regulation by the CERC and SERC. See the section titled “Regulations and Policies”

beginning on page 80 of this Shelf Prospectus. Further, we are subject to changes in Indian law, as well as to changes in

regulation and government policies and accounting principles. We also receive certain benefits and take advantage of

certain exemptions available to our classification as a public financial institution under section 4A the Companies Act

and as a NBFC under the RBI Act, 1934. The laws and regulations governing us could change in the future and any

such changes could adversely affect our business, our future financial performance, by requiring a restructuring of our

activities, which may impact our results of operations.

30. We have certain cash credit facilities which can be recalled by our lenders at any time that may affect our

financial condition adversely.

We have certain cash credit facilities amounting to ` 2749.93 crores as on March 31, 2011 which can be recalled by our

respective lenders at any time. In the event any of our lenders recall the cash credit facilities, we may face adverse

liquidity problems and our financial condition may get affected to the extent of the financial assistance recalled.

31. A decline in our capital adequacy ratio could restrict our future business growth.

We are required under applicable laws and regulations to maintain a capital adequacy ratio of at least 15.0% of our risk-

weighted assets, with the minimum requirement of Tier I capital being 10.0%. Our capital adequacy ratio was 15.71%

as of March 31, 2011, with Tier I capital comprising 14.69%. If we continue to grow our loan portfolio and asset base,

we will be required to raise additional Tier I and Tier II capital in order to continue to meet applicable capital adequacy

ratios. There can be no assurance that we will be able to raise adequate additional capital in the future on terms

favorable to us or that we will be able to retain our IFC classification and this may adversely affect the growth of our

business.

32. We have entered and may enter into certain transactions with related parties, which may not be on an arm's

length basis or may lead to conflicts of interest.

We have entered and may enter into transactions with related parties, including our Directors. There can be no

assurance that we could not have achieved more favorable terms on such transactions had they not been entered into

with related parties. Furthermore, it is likely that we will enter into related party transactions in the future. There can be

no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial

condition and results of operations. The transactions we have entered into and any future transactions with related

parties have involved or could potentially involve conflicts of interest.

Our subsidiary PFC Consulting Limited ("PFCCL") is engaged in the consultancy services business, and our own

constitutional documents permit us to engage in similar business, and there is no relationship agreement or similar

arrangement currently in place between PFCCL and us, which may result in potential conflicts of interest.

33. Our Directors may have business interests similar to ours, which may result in a conflict of interest that may

adversely affect future financing opportunity referrals.

Some of our Directors have interests in other companies, which are in businesses similar to ours, which may result in

potential conflict of interest. Our Director, Mr. M. K. Goel is also a director on the board of PTC India Financial

Services Limited, a company that has business interest similar to ours. Further, our Director Mr. Devender Singh is a

government nominee director on the board of Rural Electrification Corporation Limited, which is also in a business

similar to ours. For further information with respect to directorships of certain of our Directors, see section titled

"Management" on page 102. Accordingly, potential conflicts of interest may arise out of common business objectives

shared by us and our Directors and there can be no assurance that these or other conflicts of interest will be resolved in

an impartial manner.

34. We have negative cash flows from operations in recent periods. There is no assurance that such negative cash

flows from operations shall not recur in the future.

Our cash outflows relating to loans and advances we disburse (net of any repayments we receive) are reflected in our

cash flow from operating activities whereas the cash inflows from external funding we procure (net of any repayments

of such funding) to disburse these loans and advances are reflected in our cash flows from financing activities. The net

cash flows from investing activities primarily represent sale and purchase of fixed assets, other investments and interest

received. The following table sets forth certain information with respect to our historical negative cash flows in the

periods indicated:

Page 22: Shelf Prospectus

20

Particulars As of March 31(Consolidated) (`̀̀̀ in Crores)

2009 2010 2011

Net cash from operating activities (10,736.90) (13,405.21) (16,575.45)

Net cash from investing activities 32.11 8.78 (21.21)

Net cash from financing activities 10449.28 14,437.23 17,580.46

Net increase/(decrease) in cash and cash equivalents (255.51) 1,040.80 983.80

Our operating profits before allocation for working capital changes in these periods were as follows:

Particulars (`̀̀̀ in crore)

Fiscal 2009 2270.98

Fiscal 2010 2831.52

Fiscal 2011 3647.36

However, our net cash flow from operating activities was negative in these periods as a result of an increase in our

lending operations.

35. Our insurance may not be adequate to protect us against all potential losses to which we may be subject.

We maintain insurance for our physical assets such as our office and residential properties against standard fire and

special perils (including earthquake), amounting to ` 108 crore. In addition, we maintain a group personal accident

insurance as well as directors' and officers' insurance policy. However, the amount of our insurance coverage may be

less than the replacement cost of such property and may not be sufficient to cover all financial losses that we may suffer

should a risk materialize. If we were to incur a significant liability for which we were not fully insured, it could have a

material adverse effect on our results of operations and financial position.

In addition, in the future, we may not be able to maintain insurance of the types or in the amounts which we deem

necessary or adequate or at premiums which we consider acceptable. The occurrence of an event for which we are not

adequately or sufficiently insured or the successful assertion of one or more large claims against us that exceed

available insurance coverage, or changes in our insurance policies (including premium increases or the imposition of

large deductible or co-insurance requirements), could have a material and adverse effect on our business, financial

condition, results of operations, and cash flows.

36. We may not be able to identify attractive financing or investment opportunities, or provide financing to or make

investments in such identified opportunities, which may adversely affect our financial condition and results of

operations.

There can be no assurance that we will be able to identify attractive financing or investment opportunities that meet our

financing and investment criteria, or provide financing to or make investments in such identified opportunities. The

activity of identifying attractive financing and investment opportunities is highly competitive and providing financing to

or making such investments may be subject to various factors beyond our control. In addition, we may not be able to

fully ascertain the risks involved in the power sector projects we finance or invest in due to limited information.

Furthermore, any investment that we make in power sector projects may be subject to contractual, legal and other

restrictions, such as pre-emption rights and the requirement to obtain consents and approvals on resale. Lack of liquidity

in these investments may make it difficult to sell investments even if we determine that the sale is in our interest. In

addition, if we are required to liquidate all, or a portion of our investment portfolio quickly, we may not realize an

appropriate value for our investments. We may also face other restrictions on our ability to liquidate an investment in an

investee company to the extent that we have material non-public information regarding such company. In addition, the

large number of competitors compared to the limited number of attractive investment opportunities in the Indian power

sector may increase the cost at which investments may be made and reduce potential profits. We may also incur

significant expenses identifying, investigating and seeking to acquire potential investments, which are ultimately not

consummated, including expenses relating to due diligence, transportation, extended competitive bidding processes,

legal expenses and the fees of other third-party advisors. Furthermore, in case of equity investments in the power sector,

our competing entities may seek to sell assets at the same time as us, thereby resulting in a decline in the value of such

assets.

Page 23: Shelf Prospectus

21

37. We are in process of executing a perpetual lease deed for our registered office premises and consequently do

not have title to the premises at present.

In accordance with the Memorandum of Agreement dated February 5, 2002 entered into with NDMC, we were required

to execute a perpetual lease deed with the NDMC after completion of construction of the building where our registered

office is located. We are currently awaiting execution of the same, as a result of which, we presently do not hold title to

the premises where our registered office is situated.

38. Our business and our industry are dependent on the policies and support of the Government of India which

makes us susceptible to changes in such policies and the level of support we receive.

We are a GoI undertaking operating in a regulated industry. Our business and our industry are dependent, directly and

indirectly, on the policies and support of the GoI in many significant ways, including with respect to the cost of our

capital, the financial strength of our borrowers, the management and growth of our business and our industry and our

overall profitability. Historically, we have been able to reduce our cost of capital and reliance on commercial

borrowings because of various forms of assistance received from GoI. Currently, we receive tax concessions with

respect to certain types of our bonds that enable us to price such bonds at a lower rate of interest than would otherwise

be available to us. We also benefit from direct tax benefits provided by the GoI.

The GoI also impacts the nature of our business in a number of ways. In particular, the GoI establishes the schemes in

which we and our borrowers participate. Like any other public sector undertaking, the GoI can also influence or

determine key decisions about our Company, including with respect to dividends and the appointment of members of

our Board.

Additionally, the GoI may implement policies that are inconsistent with our business objectives. For example, although

we intend to continue to diversify our asset portfolio and continue to increase generation-related lending activity, our

lending capacity is not unlimited and the GoI could seek refocus of our lending capacity on transmission and

distribution projects or rural areas.

Our borrowers are also significantly impacted by the policies and support of the GoI in a variety of ways, as the GoI

regulates the industry in which our borrowers operate. For example, the GoI has established a number of schemes and

provides incentives that provide benefits to power projects that have enhanced the financial viability of the projects and

the financial position of our borrowers. Additionally, the GoI has in the past assisted us in procuring the repayment of

our loans from our borrowers.

Furthermore, the growth of our business is dependent upon the continued growth of the power sector and the overall

Indian economy, which are significantly impacted by the policies of the GoI. Changes in the policies of or in the level

of direct or indirect support to us provided by, the GoI in these or other areas could have a material adverse effect on

our business, financial condition and results of operations.

39. Our ability to borrow from various banks may be restricted by changes in guidelines issued by the RBI

imposing restrictions on banks in relation to their exposure on NBFCs, including us, that may adversely affect

our growth and margins.

The RBI regulates on a continuous basis, the permitted exposure (both lending and investment, including off balance

sheet exposures) that banks may hold with respect to NBFCs such as ourselves. Accordingly, banks may assume

exposure limits of up to 15% of the bank's capital funds as per its last audited balance sheet for a NBFC engaged in

businesses similar to our Company, provided the exposure in excess of 10%, is on account of funds on-lent by the

NBFC to the infrastructure sector.

Presently, the ceiling on bank credit-linked to Net Owned Fund of NBFCs has been withdrawn in respect of all NBFCs

registered with the RBI and engaged in principal business of loan and investment activities, among others. Accordingly,

banks may extend need based working capital facilities as well as term loans to all such NBFCs.

Furthermore, the RBI has suggested that banks consider fixing internal limits for their aggregate exposure to all NBFCs

and may formulate suitable loan policies with the approval of their boards of directors within the prudential guidelines

and exposure norms prescribed by the RBI to extend various kinds of credit facilities to NBFCs subject to certain

conditions.

Although we do not believe such exposure limits has had any adverse effects on our own liquidity, we believe that

individual lenders from whom we currently borrow may not be able to continue to provide us funds.

Page 24: Shelf Prospectus

22

As we grow our business and increase our borrowings we may face similar limitations with other lenders, which could

impair our growth and interest margins and could therefore have a material adverse effect on our business, financial

condition and results of operations.

40. We may fail to obtain certain regulatory approvals in the ordinary course of our business in a timely manner or

at all, or to comply with the terms and conditions of our existing regulatory approvals and licenses which may

have a material adverse effect on the continuity of our business and may impede our effective operations in the

future.

We require certain regulatory approvals, sanctions, licenses, registrations and permissions for operating and expanding

our business. We may not receive or be able to renew such approvals in the time frames anticipated by us, or at all,

which could adversely affect our business. If we do not receive, renew or maintain the regulatory approvals required to

operate our business it may have a material adverse effect on the continuity of our business and may impede our

effective operations in the future.

NBFCs in India are subject to strict regulations and supervision by the RBI. These laws and regulations impose

numerous requirements on us, including those relating to asset classification and prescribed levels of capital adequacy,

cash reserves and liquid assets. However, as a government company, loans made by us to Central and State entities in

the power sector have been exempted from certain RBI policies relating to prudential lending norms applicable to

certain non-government NBFCs, such as asset classification norms, RBI's norms in respect of cash reserves and liquid

assets. In addition to the numerous conditions required for the registration as a NBFC with the RBI, we are required to

maintain certain statutory and regulatory permits and approvals for our business. In the future, we will be required to

renew such permits and approvals and obtain new permits and approvals for any proposed operations. There can be no

assurance that the relevant authorities will issue any of such permits or approvals in the time-frame anticipated by us or

at all. Failure by us to renew, maintain or obtain the required permits or approvals may result in the interruption of our

operations and may have a material adverse effect on our business, financial condition and results of operations.

Further, the RBI has not provided for any ceiling on interest rates that can be charged by non-deposit taking NBFCs.

There may be future changes in the regulatory system or in the enforcement of the laws and regulations including

policies or regulations or legal interpretations of existing regulations, relating to or affecting interest rates, taxation,

inflation or exchange controls, that could have an adverse effect on non-deposit taking NBFCs. In addition, we are

required to make various filings with the RBI, the RoC and other relevant authorities pursuant to the provisions of RBI

regulations, Companies Act and other regulations. If we fail to comply with these requirements, or a regulator claims

we have not complied with such requirements, we may be subject to penalties. Moreover, these laws and regulations

can be amended, supplemented or changed at any time such that we may be required to restructure our activities and

incur additional expenses in complying with such laws and regulations, which could materially and adversely affect our

business. In addition, any historical or future failure to comply with the terms and conditions of our existing regulatory

or statutory approvals may cause us to lose or become unable to renew such approvals. For further details, see section

titled "Regulations and Policies" on page 80.

41. We are subject to stringent labour laws, thus making it difficult for us to maintain flexible human resource

policies, which could have an adverse affect on our business, financial condition and results of operations.

India has stringent labour legislation that protects the interests of workers, including legislation that sets forth detailed

procedures for employee removal and dispute resolution and imposes financial obligations on employers upon

employee layoffs. This makes it difficult for us to maintain flexible human resource policies, discharge employees or

downsize, which though not quantifiable, may adversely affect our business and profitability.

42. Some of the properties owned or taken on lease by us may have certain irregularities in title, as a result of

which our operations may be impaired.

We have taken on lease properties for the purposes of our branch offices and for residential purposes for our employees.

Certain of these properties may not have been constructed or developed in accordance with local planning and building

laws and other statutory requirements. In addition, there may be certain irregularities in title in relation to some of our

owned/leased properties. For example, some of the agreements for such arrangements may not have been duly executed

and/or adequately stamped or registered in the land records of the local authorities or the lease deeds have expired and

have not yet been renewed. Our business may be adversely affected if we are unable to continue to utilize these

properties as a result of any irregularity of title or otherwise.

43. We have not entered into any definitive arrangements to utilise the Net Proceeds towards the object of this

Page 25: Shelf Prospectus

23

Issue.

We intend to utilize the Net Proceeds raised through this Issue towards ‘infrastructure lending’ as defined by the RBI in

the regulations issued by it from time to time, after meeting the Issue expenses. Our Company has not entered into any

definitive agreements for utilization of the Net Proceeds towards the object of this Issue. For further details in this

regard, see the section titled “Objects of the Issue” on page 45 of the Shelf Prospectus.

44. We may become liable for the acts or omissions of external consultants engaged by PFC Consulting Limited

(“PFCCL”).

Our Company’s wholly-owned subsidiary, PFCCL, provides consultancy services and may undertake execution and

valuation of projects in the power distribution sector on behalf of its clients. For these purposes, PFCCL employs

external consultants. In the event that any acts or omissions of these external consultants result in professional

negligence or breach of contract, we could become liable to our clients or third parties for the acts or omissions of such

external consultants which could have an adverse affect on our business, financial condition and results of operations.

45. Any Cross Default of financial indebtedness would trigger payment to all other borrowings made by the

corporation thereby adversely affecting the liquidity position of the Company

PFC has given cross default covenant in few of its borrowings which means that if the company defaults in any of its

obligation under its loan, the loan which has the cross default clause will also become payable even if there is no breach

of covenant or default of payment on this loan. The risk may have impact on the liquidity in case of happening of such

event.

46. Volatility in Foreign Exchange and un-hedged foreign currency could adversely affect our financial conditions

and results of operations.

The Company has put in place Currency Risk Management (CRM) policy to manage risks associated with foreign

currency borrowings. The Company enters into hedging transactions to cover exchange rate and interest rate risk

through various instruments like currency forward, option, principal swap, interest rate swap and forward rate

agreements.

We currently engaged in borrowing from the foreign market in foreign currency. The enhanced level of borrowing will

expose PFC to fluctuations in foreign exchange rates which may have adverse effects on financial results of the

corporation. As on 31st March, 2011 our outstanding foreign currency borrowing is 5.81% approx. Although we have in

place currency risk management policy to manage risk associated with foreign currency borrowing but there is no

assurance that it will remain effective over a period of time. We expect our Company may be exposed to fluctuations in

foreign currency rates with the increased foreign currency borrowings. Volatility in foreign exchange could adversely

affect our financial conditions.

As on March, 31 2011, we had entered into hedging transaction or lent on back-to-back basis to cover 14.87% of its

foreign currency principal exposure.

47. Significant differences exist between Indian GAAP and IFRS which may be material to investor’s assessment

of our financial condition.

We may be required to prepare annual and interim financial statements under IFRS in accordance with the roadmap for

the adoption of, and convergence with, IFRS announced by the Ministry of Corporate Affairs, GoI in January, 2010.

The convergence of certain Indian Accounting Standards with IFRS was notified by the Ministry of Corporate Affairs

on February 25, 2011. The date of implementing such converged Indian accounting standards has not yet been

determined, and will be notified by the Ministry of Corporate Affairs in due course after various tax-related and other

issues are resolved.

Our financial condition, results of operations, cash flows or changes in shareholders’ equity may appear materially

different under IFRS than under Indian GAAP. This may have a material adverse effect on the amount of income

recognized during that period and in the corresponding period in the comparative period. In addition, in our transition to

IFRS reporting, we may encounter difficulties in the ongoing process of implementing and enhancing our management

information systems. Moreover, our transition may be hampered by increasing competition and increased costs for the

relatively small number of IFRS-experienced accounting personnel available as more Indian companies begin to

prepare IFRS financial statements.

Page 26: Shelf Prospectus

24

48. There is a significant risk due to changes in Environment norms being followed for the thermal power projects

with the corporation’s main focus for financing of thermal projects, it may pose problems in future.

With the adoption of norms provided for the climate conservation in line with the global parameters there may be risk

for the environmental norms being followed for the thermal power projects which is the PFC’s major focus in financing

of the generation projects. This may pose a problem in the future sanctions/ disbursements and also the timely

implementation of these Power Projects. Consequently any delay in implementation of these projects will have adverse

impact on the financials of the Corporation.

49. As the Company adopts Information Technology the risk exists for the possibilities of IT frauds

With the computerization of the accounting, payroll, human resource systems and in other areas of PFC, there is every

possibility of fraud related to hacking of internal systems, possibility of manual intervention which may lead to frauds.

RISKS RELATING TO THE INDIAN ECONOMY

We are an Indian company and all of our assets and customers are located in India. Consequently, our financial

performance will be influenced by political, social and economic developments in India and in particular by the policies

of the GoI.

50. A slowdown in economic growth in India could adversely impact our business.

We are dependent on prevailing economic conditions in India and our results of operations are significantly affected by

factors influencing the Indian economy. Any slowdown in economic growth in India could adversely affect us,

including our ability to grow our loan portfolio, the quality of our assets, and our ability to implement our strategy.

Any slowdown in the growth or negative growth of sectors where we have a relatively higher exposure could adversely

impact our performance. Any such slowdown could adversely affect our business, prospects, results of operations and

financial condition.

51. Private participation in the power sector in India is dependent on the continued growth of the Indian economy

and regulatory developments in India. Any adverse change in policy/implementation/industry demand may

adversely affect us.

Although the power sector is rapidly growing in India, we believe that further development of this sector is dependent

upon the formulation and effective implementation of regulations and policies that facilitate and encourage private

sector investment in power projects. Many of these regulations and policies are evolving and their success will depend

on whether they are designed to adequately address the issues faced and are effectively implemented. In addition, these

regulations and policies will need continued support from stable and experienced regulatory regimes that not only

stimulate and encourage the continued investment of private capital into power projects, but also lead to increased

competition, appropriate allocation of risk, transparency, and effective dispute resolution. The availability of private

capital and the continued growth of the private power sector in India are also linked to continued growth of the Indian

economy. Many specific factors in the power sector may also influence the success of power projects, including

changes in policies, regulatory frameworks and market structures. Any adverse change in the policies relating to the

power sector may leave us with unutilized capital and interest and debt obligations to fulfill. If the central and state

governments’ initiatives and regulations in the power sector do not proceed in the desired direction, or if there is any

downturn in the macroeconomic environment in India, our business, prospects, results of operations and financial

condition could be adversely affected. In addition, it is generally believed that demand for power in India will increase

in connection with expected increases in India's GDP. However, there can be no assurance that demand for power in

India will increase to the extent we expect or at all. In the event demand for power in India does not increase as

anticipated, the extent to which we are able to grow our business by financing the growth of the power sector would be

limited and this could have a material adverse effect on our business, financial condition and results of operations.

52. Significant shortages in the supply of crude oil, natural gas or coal could adversely affect the Indian economy

and the power sector projects to which we have exposure, which could adversely affect us.

India imports approximately 75 % of its requirements of crude oil. Crude oil prices are volatile and are subject to a

number of factors such as the level of global production and political factors such as war and other conflicts,

particularly in the Middle East, where a substantial proportion of the world’s oil and natural gas reserves are located.

The recent events in Middle East has increased political uncertainity in this region.Further, in June 2010, the GoI

eliminated subsidies on certain petroleum products, and has initiated partial de-regulation since then.

Page 27: Shelf Prospectus

25

Any significant increase in oil prices could affect the Indian economy, including the power sector, and the Indian

banking and financial system. High oil prices could also add to inflationary pressures in the Indian economy.

Additionally, increases in oil prices may have a significant impact on the power sector and related industries in which

we have substantial exposure. This could adversely affect our business including our ability to grow, the quality of our

asset portfolio, our financial performance and our ability to implement our strategy.

In addition, natural gas is a significant input for power projects. India has experienced interruptions in the availability of

natural gas, which has caused difficulties in these projects. Continued difficulties in obtaining reliable, timely supply of

natural gas could adversely affect some of the projects we finance and could impact the quality of our asset portfolio

and our financial performance. Prices of other key raw materials, for example steel, coal and cement, have also risen in

recent years and if the prices of such raw materials approach levels that project developers deem unviable, this will

result in a slowdown in the infrastructure sector and thereby reduce our business opportunities, our financial

performance and our ability to implement our strategy.

Continued shortages of fuel could adversely affect some of the projects we finance and could impact the quality of our

asset portfolio and our financial performance.

53. Political instability or changes in the government could delay the liberalization of the Indian economy and

adversely affect economic conditions in India generally, which could impact our financial results and

prospects.

Since 1991, successive Indian governments have pursued policies of economic liberalization, including significantly

relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the

Indian economy as producers, consumers and regulators has remained significant. Although, the current government has

announced policies and taken initiatives that support the economic liberalization policies, the rate of economic

liberalization could change, and specific laws and policies affecting banking and finance companies, foreign investment

and other matters affecting investment in our securities could change as well. Any major change in government policies

might affect the growth of Indian economy and thereby our growth prospects. Additionally, as economic liberalization

policies have been a major force in encouraging private funding of power sector development, any change in these

policies could have a significant impact on power sector development, business and economic conditions in India,

which could adversely affect our business and our future financial performance.

54. Difficulties faced by other financial institutions or the Indian financial sector generally could cause our

business to suffer.

We are exposed to the risks consequent to being part of the Indian financial sector. This sector in turn may be affected

by financial difficulties and other problems faced by Indian financial institutions. Certain Indian financial institutions

have experienced difficulties during recent years, and some co-operative banks have also faced serious financial and

liquidity difficulties in the past. Any major difficulty or instability experienced by the Indian financial sector could

create adverse market perception, which in turn could adversely affect our business and financial performance.

55. Terrorist attacks, civil unrest and other acts of violence or war involving India and other countries could

adversely affect the financial markets and our business.

India has from time to time experienced social and civil unrest and hostilities within itself and with neighbouring

countries. India has also experienced terrorist attacks in some parts of the country. These hostilities and tensions and/or

the occurrence of terrorist attacks have the potential to cause political or economic instability in India and adversely

affect our business and future financial performance. Further, India has also experienced social unrest in some parts of

the country. If such tensions occur in other parts of the country, leading to overall political and economic instability, it

could have an adverse effect on our business, prospects, results of operations and financial condition. These acts may

also result in a loss of business confidence, make travel and other services more difficult and ultimately adversely affect

our business.

56. Natural calamities could have a negative impact on the Indian economy and cause our business to suffer.

India has experienced natural calamities such as earthquakes, floods and drought in the recent past. The extent and

severity of these natural disasters determine their impact on the Indian economy. In previous years, many parts of India

received significantly less than normal rainfall. As a result, the agricultural sector recorded minimal growth. Prolonged

spells of below normal rainfall in the country or other natural calamities could have a negative impact on the Indian

economy, thereby affecting our business, prospects, results of operation and financial condition.

Page 28: Shelf Prospectus

26

57. Changes in legislation, including tax legislation, or policies applicable to us could adversely affect our results

of operations.

The Finance Minister has presented the Direct Tax Code Bill, 2010 ("DTC Bill") on August 30, 2010, which is

proposed to be effective from April 1, 2012. On the finalization of the DTC Bill and on obtaining the approval of the

Indian Cabinet, the DTC Bill will be placed before the Indian Parliament for its approval and notification as an Act of

Parliament. Accordingly, it is currently unclear what effect the Direct Tax Code would have on our financial statements.

However, under the proposed DTC Bill, the deduction u/s 36(1)(viia)(c) and 36(1)(viii) of the I.T. Act, which are

currently available to the Company, would not be available in the future, which will increase our tax liability. If the

DTC Bill is passed in its entirety and we are affected, directly or indirectly, by any provision of the Direct Tax Code, or

its application or interpretation, including any enforcement proceedings initiated under it and any adverse publicity that

may be generated due to scrutiny or prosecution under the Direct Tax Code, it may have a material adverse effect on

our business, financial condition and results of operations. For more information, see section titled "Statement of Tax

Benefits" on page 46.

In addition, upon the passing of the Companies Bill, 2009 by the Indian legislature the regulatory framework may

undergo a change which may affect our operations.

58. Our ability to raise foreign currency borrowings may be constrained by Indian law.

As an Indian company, we are subject to exchange controls that regulate borrowing in foreign currencies. Such

regulatory restrictions limit our financing sources and hence could constrain our ability to obtain financing on

competitive terms and refinance existing indebtedness. In addition, we cannot assure you that the required approvals

will be granted to us without onerous conditions, if at all. Limitations on raising foreign debt may have an adverse

effect on our business, financial condition and results of operations.

59. Any downgrading of our debt rating or India’s sovereign rating by a credit rating agency could have a negative

impact on our business.

Any adverse revisions to our credit rating or India’s sovereign credit ratings for domestic and international debt by

credit rating agencies may adversely impact our ability to raise additional financing, and the interest rates and other

commercial terms at which such additional financing is available. This could have a material adverse effect on our

business and financial performance, our ability to obtain financing for lending operations.

60. The Indian and global financial sector is very competitive and the ability of banks and financial institutions to

grow depends on their ability to compete effectively.

There is heavy competition among Indian public and private sector banks, foreign banks operating in India and financial

institutions to lend to power sector. Some of these institutions are smaller and may be more flexible and better

positioned to take advantage of market opportunities than big banks. In particular, private banks may have operational

advantages in implementing new technologies, rationalizing branches and recruiting employees through incentive-based

compensation. Additionally, both the Indian and global financial sector may experience further consolidation, resulting

in fewer banks and financial institutions. The GoI has recently permitted foreign banks to set up wholly owned

subsidiaries in India. It has also allowed takeovers of Indian banks by permitting foreign banks to acquire up to a 74 per

cent stake in an existing private bank. These developments are likely to further increase competition and may stimulate

consolidation in the Indian financial sector. These competitive pressures affect the Indian financial sector and our

growth will depend in large part on our ability to respond in an effective and timely manner to these competitive

pressures.

61. There may be other changes to the regulatory framework that could adversely affect us.

The statutory and regulatory framework for the Indian power sector has changed significantly in recent years and the

impact of these changes is yet to be seen. The Electricity Act, 2003 (the “Electricity Act”) puts in place a framework for

reforms in the sector, but in many areas the details and timing are yet to be determined. It is expected that many of these

reforms will take time to be implemented. Furthermore, there could be additional changes in the areas of tariff and other

policies, the unbundling of the State Power Utilities, restructuring of companies in the power sector, open access and

parallel distribution, and licensing requirements for, and tax incentives applicable to companies in the power sector. In

2004, the GoI reviewed the Electricity Act. We presently do not know what the nature or extent of review in future will

be, and cannot assure that such review will not have an adverse impact on our financial condition and results of

operations.

Page 29: Shelf Prospectus

27

62. Direct capital market access by our borrowers could adversely affect us.

The Indian capital markets are developing and maturing and, as such, there may be a shift in the pattern of power sector

financing. Financially stronger state power utilities might source their fund requirement directly from the market. We

have a large exposure to state power utilities and such changes may have an adverse impact on our business, financial

condition and results of our operations.

63. Recent global economic conditions have been unprecedented and challenging and have had, and continue to

have, an adverse effect on the Indian financial markets and the Indian economy in general, which has had, and

may continue to have, a material adverse effect on our business, financial condition and results of operations.

Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions

and recession in most major economies.

Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs,

geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to

increased market volatility and diminished expectations for western and emerging economies.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely

affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the

strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases,

cease to provide credit to businesses and consumers. These factors have led to a decrease in spending by businesses and

consumers alike and corresponding decreases in global infrastructure spending and commodity prices. Continued

turbulence in the United States and international markets and economies and prolonged declines in business consumer

spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our

customers, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs.

These global market and economic conditions have had, and continue to have, an adverse effect on the Indian financial

markets and the Indian economy in general, which may continue have a material adverse effect on our business and our

financial performance.

64. Companies operating in India are subject to a variety of central and State government taxes and surcharges.

Tax and other levies imposed by the central and state governments in India that affect our tax liability include: central

and state taxes and other levies, income tax, value added tax, turnover tax, service tax, stamp duty and other special

taxes and surcharges which are introduced on a temporary or permanent basis from time to time. Moreover, the central

and state tax scheme in India is extensive and subject to change from time to time. For example, a new direct tax code is

proposed to be introduced before the Indian Parliament. In addition, there is a proposal to introduce a new goods and

services tax and the scope of the service tax is proposed to enlarge. The central or state government may in future

increase the corporate income tax it imposes. Any such future increases or amendments may affect the overall tax

efficiency of companies operating in India and may result in significant additional taxes becoming payable. Additional

tax exposure could adversely affect our business and results of operations.

RISKS RELATING TO THE BONDS

65. There has been no prior public market for the Bonds and it may not develop in the future, and the price of the

Bonds may be volatile.

The Bonds have no established trading market. Moreover, the Bonds are subject to statutory lock-in for a minimum

period of five years from the Deemed Date of Allotment and no trading market would exist or be established for the

Bonds for the said period despite the Bonds being listed on BSE. Even after the expiry of the Lock-in Period, there can

be no assurance that a public market for these Bonds would develop.

There can be no assurance that an active public market for the Bonds will develop or be sustained. The liquidity and

market prices of the Bonds can be expected to vary with changes in market and economic conditions, our financial

condition and prospects and other factors that generally influence market price of Bonds. Such fluctuations may

significantly affect the liquidity and market price of the Bonds, which may trade at a discount to the price at which you

purchase the Bonds.

66. The Bonds are classified as ‘long term infrastructure bonds’ eligible for tax benefits under Section 80CCF of

Page 30: Shelf Prospectus

28

the Income Tax Act, up to an amount of `̀̀̀ 20,000, on subscription to the Bonds. In the event your investment in

the Bonds exceeds `̀̀̀ 20,000 in any assessment year, you will be eligible for benefits under Section 80CCF of the

Income Tax Act only for an amount up to `̀̀̀ 20,000.

The Bonds are classified as ‘long term infrastructure bonds’ issued in terms of Section 80CCF of the Income Tax Act

and the notification dated September 9, 2011, issued by the MoF. In accordance with Section 80CCF of the Income Tax

Act, the amount, not exceeding ` 20,000, paid or deposited as subscription to ‘long-term infrastructure bonds’ during

the previous year relevant to the assessment year beginning April 1, 2012 shall be deducted in computing the taxable

income of a resident individual or HUF. In the event any Applicant applies for the Bonds in excess of ` 20,000, the

aforementioned tax benefit will be available to such Applicant only to the extent of ` 20,000. Subscription to Bonds for

an additional amount or interest on the Bonds will not be eligible for deduction from taxable income.

67. The legal regime in respect of the issuance of ‘long term infrastructure bonds’ with associated tax benefits has

been recently introduced and its implementation and efficiency are yet to be established.

The legal regime in relation to the issuance of ‘long term infrastructure bonds’, with associated tax benefits on

investment, was introduced in the Finance Bill of 2010 and extended in the Finance Bill of 2011 till Fiscal 2012.

Pursuant to a notification dated September 9, 2011, the MoF, issued terms and conditions required for issuance of ‘long

term infrastructure bonds’ by the Company. We cannot assure you that the tax benefits offered for investment in such

‘long term infrastructure bonds’ would be continued in the future. Further, we cannot assure you that any other company

would be issuing such ‘long term infrastructure bonds’ in the future and that a market for such bonds will develop or be

sustained in the future.

Further, there is no assurance as to whether the proposed tax changes to the income tax regime pursuant to the

notification of the draft Direct Tax Code (“DTC”) may result in the extinguishment of benefits available under Section

80CCF of the Income Tax Act, thus restricting any similar issuances in the future and affecting the public market for the

Bonds.

68. There is no guarantee that the Bonds issued pursuant to this Issue will be listed on BSE in a timely manner, or

at all.

In accordance with Indian law and practice, permissions for listing and trading of the Bonds issued pursuant to this

Issue will not be granted until after the Bonds have been issued and allotted. Approval for listing and trading will

require all relevant documents authorising the issuing of Bonds to be submitted. There could be a failure or delay in

listing the Bonds on the BSE.

69. You may not be able to recover, on a timely basis or at all, the full value of the outstanding amounts and/or the

interest accrued thereon in connection with the Bonds.

Our ability to pay interest accrued on the Bonds and/or the principal amount outstanding from time to time in

connection therewith would be subject to various factors, including our financial condition, profitability and the general

economic conditions in India and in the global financial markets. We cannot assure you that we would be able to repay

the principal amount outstanding from time to time on the Bonds and/or the interest accrued thereon in a timely manner,

or at all.

70. A debenture redemption reserve will be created, up to an extent of 50% for the Bonds.

The Department of Company Affairs General Circular No.9/2002 No.6/3/2001-CL.V dated April 18, 2002 specifies that

a Public Financial Institution (“PFI”) shall create debenture redemption reserve to the extent of 50% of the value of the

debentures issued through public issue. Therefore, we will maintain a debenture redemption reserve only to the extent

of 50% of the Bonds issued and the Bondholders may find it difficult to enforce their interests in the event of or to the

extent of a default in excess of such reserve.

71. Changes in interest rates may affect the price of the Bonds.

All securities where a fixed rate of interest is offered, such as the Bonds, are subject to price risk. The price of such

securities will vary inversely with changes in prevailing interest rates, i.e., when interest rates rise, prices of fixed

income securities fall and when interest rates drop, the prices increase. The extent of fall or rise in the prices is a

function of the existing coupon rate, days to maturity and the increase or decrease in the level of prevailing interest

rates. Increased rates of interest, which frequently accompany inflation and/or a growing economy, are likely to have a

negative effect on the trading price of the Bonds.

Page 31: Shelf Prospectus

29

72. The Bondholders are required to comply with certain lock-in requirements.

The Bondholders are required to hold the Bonds for a minimum period of five years before they can sell their holding or

utilise the buyback option offered by the Company. This will result in a lack of liquidity for the Bondholders during

such Lock-in Period. Additionally, after the Lock-in Period, the Company will provide for buyback of the Bonds on the

Buyback Date, in the manner prescribed under the prospectus.

In the event a holder of Bonds, who has not opted for the buyback facility in the Application Form, fails to inform the

Company during the Buyback Intimation Period or any other period as mentioned in the respective Tranche Prospectus,

of his or her intention to utilise the buyback facility offered by the Company, such Bonds, shall not be bought back by

the Company on the Buyback Date. In such a case, a Bondholder may, after expiry of the Lock-in Period, sell or dispose

of those Bonds on the stock exchange.

In the event a holder of Bonds, who has opted for the buyback facility in the Application Form, fails to inform the

Company during the Buyback Intimation Period, of his or her intention not to utilise the buyback facility offered by the

Company, such Bonds shall be compulsorily bought back by the Company on the Buyback Date.

73. Any downgrading in credit rating of our Bonds may affect the trading price of our Bonds.

The Bonds proposed to be issued under this Issue have been rated ‘AAA/Stable’ by CRISIL and ‘AAA’ with stable

outlook by ICRA. These ratings may be suspended, withdrawn or revised at any time. Any revision or downgrading in

the credit rating may lower the trading price of the Bonds and may also affect our ability to raise further debt.

74. Payments made on the Bonds will be subordinated to certain tax and other liabilities preferred by law.

The Bonds will be subordinated to certain liabilities preferred by law such as to claims of the GoI on account of taxes,

and certain liabilities incurred in the ordinary course of our transactions. In particular, in the event of bankruptcy,

liquidation or winding-up, our assets will be available to pay obligations on the Bonds only after all of those liabilities

that rank senior to these Bonds have been paid. In the event of bankruptcy, liquidation or winding-up, there may not be

sufficient assets remaining, after paying amounts relating to these proceedings, to pay amounts due on the Bonds.

Further, there is no restriction on the amount of debt securities that we may issue that may rank above the Bonds.

The issue of any such debt securities may reduce the amount recoverable by investors in the Bonds on our bankruptcy,

winding-up or liquidation.

Page 32: Shelf Prospectus

30

SECTION III - INTRODUCTION

THE ISSUE

The Company shall issue the Bonds in one or more tranche(s), on or prior to March 31, 2012, up to the amount of `

6,900 crore approved by the Board, including oversubscription, which does not exceed 25% of the incremental

infrastructure investment made by the Company in Fiscal 2011.

The following is a summary of the terms of the Bonds. This section should be read in conjunction with, and is qualified

in its entirety by, more detailed information in “Issue Structure” and “Terms of the Issue” on page 133 and 135.

COMMON TERMS FOR ALL SERIES OF THE BONDS

Issuer Power Finance Corporation Limited

Issue of Bonds Public issue of ‘long term infrastructure bonds’ in the nature of secured, redeemable, non-

convertible debentures, of face value of ` [●] each having benefits under section 80CCF of the

Income Tax Act, up to ` 6,900 crore in aggregate (which does not exceed 25% of the

incremental infrastructure investment made by the Company in Fiscal 2011). The Bonds shall be issued at par on the terms contained in the relevant tranche prospectus to be issued in respect

of each tranche.

Face Value (`) As mentioned in the respective Tranche Prospectus

Issue Price (`) As mentioned in the respective Tranche Prospectus

Minimum

Application

As mentioned in the respective Tranche Prospectus

Market Lot /

Trading Lot One Bond

Pay-in Date Application Date (Full Application Amount is payable on Application)

Ratings “AAA/Stable” from CRISIL and “AAA with stable outlook” from ICRA

Listing BSE

Security The Bonds issued by the Company will be secured by creating a charge on the book debts of the

company along with identified immovable property by an first charge/pari pasu charge, as may

be agreed between the Company and the Debenture Trustee, pursuant to the terms of the

Debenture Trust Deed.

Debenture Trustee PNB Investment Services Limited

Depositories Central Depository Services (India) Limited (“CDSL”) and National Securities Depository

Limited (“NSDL”)

Registrar Karvy Computershare Private Limited

Modes of Payment

for Applicants

1. At par cheques

2. Demand drafts

Issuance# In dematerialized form and physical form

Lock-In Period Five years from the Deemed Date of Allotment

Trading In dematerialized form only following expiry of the Lock-in Period

Issue Opening Date As mentioned in the respective Tranche Prospectus

Issue Closing Date* As mentioned in the respective Tranche Prospectus, except that the Issue may close on such

date as may be decided by the Board. In the event of an early closure of the Issue , the

Company shall ensure that notice is provided to the prospective investors through newspaper

advertisements, at least three days prior to such earlier date of Issue closure.

Deemed Date of

Allotment

The Deemed Date of Allotment shall be the date as may be determined by the Board of the

Company and notified to the BSE

Lead Managers SBI Caps, I-Sec

* The Issue shall remain open for subscription during banking hours for the period indicated above.

# In terms of Regulation 4(2)(d) of the Debt Regulations, the Company will make public issue of the Bonds in the

dematerialised form. However, in terms of Section 8 (1) of the Depositories Act, the Company, at the request of the

Investors who wish to hold the Bonds in physical form will fulfil such request.

Page 33: Shelf Prospectus

31

SPECIFIC TERMS FOR EACH SERIES OF BONDS

Series 1 2 3 4

Face Value per Bond ` [●] ` [●] ` [●] ` [●]

Frequency of Interest

payment

Annual Cumulative Annual Cumulative

Buyback Facility Yes Yes Yes Yes

Buyback Date One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

Buyback Amount ` [●] per bond and

accrued interest

calculated from the

last interest payment

date to the Buyback

Date

` [●] per bond and

interest on

Application

Interest compounded

annually at [●] %

` [●] per bond and

accrued interest

calculated from the

last interest payment

date to the Buyback

Date

` [●] per bond and

interest on

Application

Interest compounded

annually at [●]%

Buyback Intimation

Period

The period beginning

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

The period beginning

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

The period beginning

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

The period beginning

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

Interest Rate p.a (%) [●] [●] [●] [●]

Redemption/Maturity

Date

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

Maturity Amount [●] per bond and

accrued interest

calculated from the

last interest payment

date to the maturity

date

[●] per bond and

interest on

Application

Interest compounded

annually at [●]%

[●] per bond and

accrued interest

calculated from the

last interest payment

date to the maturity

date

[●] per bond and

interest on

Application

Interest compounded

annually at [●]%

*As per the condition stipulated under the Notification the yield on the Bonds(to be paid by the Issuer) shall not exceed

the yield on government securities of corresponding residual maturity, as reported by FIMMDA, as on the last working

day of the month immediately preceding the month of the issue of the Bonds.

For various modes of interest payment, see “Terms of the Issue – Modes of Payment” on page 142.

IN TERMS OF THE NOTIFICATION, THE BONDS ARE CLASSIFIED AS ‘LONG TERM

INFRASTRUCTURE BONDS’, HAVING BENEFITS UNDER SECTION 80CCF OF THE INCOME TAX

ACT. IN ACCORDANCE WITH SECTION 80CCF OF THE INCOME TAX ACT, THE AMOUNT, NOT

EXCEEDING ` 20,000, PAID OR DEPOSITED AS SUBSCRIPTION TO ‘LONG-TERM INFRASTRUCTURE

BONDS’ DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BEGINNING

APRIL 1, 2012 SHALL BE DEDUCTED IN COMPUTING THE TAXABLE INCOME OF A RESIDENT

INDIVIDUAL OR HUF. IN THE EVENT THAT ANY APPLICANT APPLIES FOR THE BONDS IN EXCESS

OF ` 20,000, (INCLUDING LONG TERM INFRASTRUCTURE BONDS BY ANY OTHER ELIGIBLE

ENTITY) THE AFORESTATED TAX BENEFITS SHALL BE AVAILABLE TO SUCH APPLICANT ONLY

TO THE EXTENT OF ` 20,000.

SELECTED FINANCIAL INFORMATION

Page 34: Shelf Prospectus

32

POWER FINANCE CORPORATION LIMITED

Statement of Consolidated Assets & Liabilities

(`̀̀̀ in crore)

Description Schedule

Number

As at

31.03.2011

As at

31.03.2010

As at

31.03.2009

I . SOURCES OF FUNDS

(1) Share Holder's Funds

(a) Share Capital 1 1147.77 1147.77 1147.77

(b) Reserves & Surplus 2 14093.04 12143.80 10369.78

15240.81 13291.57 11517.55

(2) Loans Funds

Secured Loans 3 235.36 0.00 0.00

Unsecured Loans 3 85363.21 67108.41 52160.15

85598.57 67108.41 52160.15

(3) Interest Subsidy Fund from GOI

451.87 663.49 908.94

(4) Deferred Tax Liablity (Net of Asset )

82.90 46.93 55.48

Total

101374.15 81110.40 64642.12

II . APPLICATION OF FUNDS

(1) Fixed Assets 4

(a) Gross Block

99.15 93.31 97.37

Less : Depreciation

24.57 20.47 22.19

Net Block

74.58 72.84 75.18

(c) Capital Works in Progress

2.28 1.73 0.00

(2) Investments 5 26.63 30.02 35.08

(3) Loans 6 99570.74 79855.76 64428.99

(4) Current Assets, Loans & Advances 7

(a) Cash & Bank Balances

2444.19 1460.39 418.99

(b) Other Current Assets

1943.64 1599.14 1345.35

(c) Loans & Advances

663.18 504.85 449.89

5051.01 3564.38 2214.23

Less : Current Liabilities & Provisions 8

(a) Current Liabilites

3040.47 2167.23 1880.38

(b) Provisions

310.82 247.10 231.02

3351.29 2414.33 2111.40

Net Current Assets

1699.72 1150.05 102.83

(5) MISCELLANEOUS EXPENDITURE

(To the extent not written-off or adjusted)

Preliminary Expenses

0.20 0.00 0.04

101374.15 81110.40 64642.12

Page 35: Shelf Prospectus

33

POWER FINANCE CORPORATION LIMITED

Statement of Consolidated Profits

(`̀̀̀ in crore)

Description Schedule

Number

Year ended

31.03.2011

Year ended

31.03.2010

Year ended

31.03.2009

INCOME

Operating Income 9 10174.95 8043.20 6572.02

Other Income 10 39.15 78.51 27.58

Exchange Risk Management Account

written back

Total 10214.10 8121.71 6599.60

EXPENSES

Interest and other charges 11 6426.46 4915.39 4436.61

Bonds Issue Expenses 12 63.05 43.79 65.68

Personnel & Administration Expenses 13 102.11 114.93 84.03

Depreciation 4.31 3.40 3.85

Amortisation of Intangible Assets 0.77 0.43 0.28

Provision for Contingencies

31.79 -0.57 2.17

Provision for decline in value of investments -0.06 -1.52 1.49

Preliminary Expenses written off 0.00 0.34 0.01

Total 6628.43 5076.19 4594.12

Profit for the year 3585.67 3045.52 2005.48

Prior Period adjustments 14 -0.08 0.10 0.02

Profit before tax

3585.59 3045.62 2005.50

Less(-)/Add(+) : Provision for taxation

- Current Year :-

- Tax -912.94 -811.66 -497.27

- Earlier Years :-

- Tax 10.45 135.79 32.61

Less/Add: Deferred tax liability(-)/Asset(+)

- Current Year -35.98 8.55 -43.61

- Reversal of DTL of Earlier Years

(Refer Note No.19 of Schedule-18,

0.00 0.00 483.24

Less(-) / Add(+) : Provision for fringe benefit tax 0.00 0.00 -0.78

Profit after tax available for appropriations 15 2647.12 2378.30 1979.69

Page 36: Shelf Prospectus

34

Statement of Consolidated Cashflows (`̀̀̀ in crore)

PARTICULARS Year

ende

Year

ended

Year ended

31.03.2009 I. Cash Flow from

Operating Activities :- Net Profit before Tax and 3585. 3045.9 2005.50 ADD: Adjustments for

Loss on Sale of Assets 0.06 0.02 0.01 Profit on Sale of Fixed 0.00 0.00 0.00

Depreciation / Amortisation 5.08 3.82 4.13 Amortisation of Zero 22.52 20.83 19.27 Foreign Exchange (2.47) (248.2 235.66 Dimunition in value of (0.06) (1.52) 1.49 Provision for Contingencies 31.79 (0.57) 2.17 Dividend / Interest and (6.32) (5.50) (5.41) Provision for Retirement 10.68 16.74 8.16 Provision for interest under 0.22 0.28 0.00 Interest Received 0.00 0.00 0.00 Interest Paid 0.27

Preliminary expenses 0.00 (0.26) 0.00 Operating profit before 3647. 2831.5 2270.98

Increase/Decrease :

Loans Disbursed (Net) (1975 (15496 (12701.30) Other Current Assets (350. (255.6 (289.48)

Increase/Decrease in 0.00 0.00 0.00 Loans & Advances (138. 99.31 (102.07) Miscellaneous Expenditure 0.00 0.00 (0.04) Current Liabilities and 901.0 240.99 684.43 Cash flow before

extraordinary items

(1569

5.85)

(12579

.88)

(10137.48)

Extraordinary items 0.00 0.00 0.00 Cash Inflow/Outflow from (1569 (12579 (10137.48)

Income Tax paid (879. (825.3 (599.42) Income Tax Refund

Net Cash flow from (1657 (13405 (10736.90)

I Cash Flow From Investing

Sale / decrease of Fixed 0.64 0.05 0.05 Purchase of Fixed Assets (7.55) (1.57) (2.64) Increase/decrease in Capital (0.55) (1.73) 0.00 Plant & Machinery (Lease 0.00 0.00 0.27

Investments in Subsidiaries 0.10 (0.05) (0.12) Dividend / Interest and 7.18 5.50 5.41 Interest Recived 0.00 0.00 0.00 Other Investments (21.0 6.58 29.14

Net Cash Used in

Investing Activities

(21.2

1)

8.78 32.11

I Cash Flow From

Issue of Bonds 1402 12283. 12808.90

Short Term Loans (Net) 3400. (750.0 (1080.00) Loan Against Fixed 565.9 1675.1 0.00 Raising of Long Term 7855. 8004.5 4750.00 Repayment of Long Term (5870 (4473. (4449.00) Redemption of Bonds (3710 (1981. (892.30) Foreign Currency Loans 2214. 486.88 (40.46) Interest paid (0.98) 0.00 0.00 Interest Subsidy Fund (211. (245.4 (157.81) Unclaimed Bonds (Net) (16.3 21.87 0.09 Payment of Final Dividend (200. (181.2 (134.29) Payment of Interim (468. (402.8 (355.85) Net Cash in-flow from

Financing Activities

1758

0.46

14437.

23

10449.28

Net Increase/Decrease in

Cash & Cash Equivalents

983.8

0

1040.8

0

(255.51)

Add : Cash & Cash

Equivalents at beginning of

1460.

39

419.59 674.50

Cash & Cash Equivalents 2444. 1460.3 418.99 Details of Cash & Cash

Cheques in hand, Imprest

with Postal authority &

250.2

1

10.45 2.55

Fixed Deposits with 2193. 1449.9 416.44 2444.

19

1460.3

9

418.99

Page 37: Shelf Prospectus

35

POWER FINANCE CORPORATION LIMITED

Statement of Assets & Liabilities

(`̀̀̀ in Crores)

Description Schedule

Number

As at

31.03.2011

As at

31.03.2010

As at

31.03.2009

As at

31.03.2008

As at

31.03.2007

I

.

SOURCES OF FUNDS

(1)

Share Holder's Funds

(a) Share Capital 1 1147.77 1147.77 1147.77 1147.77 1147.77

(b) Reserves & Surplus 2 14034.72 12113.02 10360.05 8182.08 7445.32

15182.49 13260.79 11507.82 9329.85 8593.09

(2) Loan Funds 3

Secured Loans

235.36 0.00 0.00 0.00 0.00

Unsecured Loans

85363.21 67108.41 52160.15 40647.81 33584.18

85598.57 67108.41 52160.15 40647.81 33584.18

(3) Interest Subsidy Fund

from GOI

451.87 663.49 908.94 1066.75 1231.63

(4) Deferred Tax Liablity

(Net of Asset )

82.97 46.95 55.48 1240.25 1142.59

Total

101315.90 81079.64 64632.39 52284.66 44551.49

II

.

APPLICATION OF

FUNDS

(1) Fixed Assets 4

Gross Block

98.94 93.21 97.33 374.86 375.84

Less : Depreciation /

Amortization

24.51 20.44 22.18 297.86 294.39

Net Block

74.43 72.77 75.15 77.00 81.45

Capital Works in

Progress

2.28 1.73 0.00 0.00 0.00

(2) Investments 5 53.88 31.43 35.86 65.59 58.88

(3) Loans 6 99570.74 79855.76 64428.99 51568.31 43902.83

(4) Net Current Assets

Current Assets, Loans

& Advances - (A)

7

(a) Cash & Bank

Balances

2350.26 1394.30 392.23 695.33 507.67

(b) Other Current

Assets

1941.87 1592.76 1340.57 1055.86 1106.11

(c) Loans & Advances

640.58 491.12 445.87 209.80 282.95

4932.71 3478.18 2178.67 1960.99 1896.73

Less : Current

Liabilities &

Provisions - (B)

8

(a) Current Liabilites

3021.47 2124.52 1860.59 1216.22 1187.87

(b) Provisions

296.87 235.71 225.69 171.01 200.53

3318.34 2360.23 2086.28 1387.23 1388.40

Net Current Assets

(A) - (B)

1614.37 1117.95 92.39 573.76 508.33

(6) MISCELLANEOUS

EXPENDITURE

(To the extent not

written-off)

Miscellaneous

Expenses

0.20 0.00 0.00 0.00 0.00

Total

101315.90 81079.64 64632.39 52284.66 44551.49

Page 38: Shelf Prospectus

36

POWER FINANCE CORPORATION LIMITED

Statement of Profits

(`̀̀̀ in crore)

Description Schedule

Number

Year ended

31.03.2011

Year ended

31.03.2010

Year ended

31.03.2009

Year ended

31.03.2008

Year ended

31.03.2007

INCOME

Operating Income 9 10128.49 8002.10 6557.37 5029.28 3816.67

Other Income 10 32.07 74.76 26.17 10.76 9.42

Exchange Risk

Management Account

101.56

Total

10160.56 8076.86 6583.54 5040.04 3927.65

EXPENSES

Interest and other

charges

11 6423.90 4912.24 4432.92 3143.74 2334.77

Bond Issue Expenses 12 63.05 43.79 65.68 38.82 33.23

Personnel &

Administration

13 92.62 106.04 86.71 81.24 53.84

Depreciation 4 4.28 3.38 3.84 4.48 3.77

Amortization of

Intangible Assets

4 0.77 0.43 0.28 0.02 0.02

Provision for

Contingencies

31.79 -0.57 2.17 -10.21 -4.85

Provision for decline

in value of

investments

-0.06 -1.52 1.49 -0.24 -0.01

Total

6616.35 5063.79 4593.09 3257.85 2420.77

Profit for the year

3544.21 3013.07 1990.45 1782.19 1506.88

Less(-) / Add(+) : Prior

Period adjustments

14 -0.07 0.13 0.02 5.21 -0.02

Profit before tax

3544.14 3013.20 1990.47 1787.40 1506.86

Less(-) / Add(+) :

Provision for Taxation

- Current Year :-

- Tax

-898.99 -800.27 -492.02 -481.98 -333.54

- Earlier Years :-

- Tax

10.45 135.79 32.61 -0.04 -14.31

Less / Add : Deferred

tax liability(-) /

- Current Year

-36.02 8.53 -43.61 -97.65 -172.05

- Reversal of DTL

of Earlier Years

483.24

Less(-) / Add(+) :

Provision for fringe

0.00 0.00 -0.73 -0.97 -0.82

Profit after tax 15 2619.58 2357.25 1969.96 1206.76 986.14

Page 39: Shelf Prospectus

37

Statement of Cashflows (`̀̀̀ in Crore)

PARTICULARS Year ended

31.03.2011 31.03.2010 31.03.2009 31.03.2008 31.03.2007

Cash Flow from Operating Activities :-

Net Profit before Tax and Extraordinary items 3544.14 3013.20 1990.47 1787.40 1506.86

ADD: Adjustments for

Loss on Sale of Assets 0.06 0.02 0.01 0.13 0.01

Profit on Sale of Fixed Assets

(0.01)

Depreciation / Amortisation 5.05 3.81 4.12 4.50 3.79

Amortisation of Zero Coupon Bonds 22.52 20.83 19.27 17.83 16.49

Foreign Exchange Loss/Gain (2.47) (248.27) 235.66 23.00 (16.14)

Dimunition in value of investments (0.06) (1.52) 1.49 (0.24) (0.01)

Provision for Contingencies 31.79 (0.57) 2.17 (10.21) (4.85)

Dividend / Interest and profit on sale of investment (3.49) (5.50) (5.41) (8.74) (2.29)

Provision for interest under IT Act 0.22 0.28 0.00 0.29 4.67

Provision for Retirement Benefits/Other Welfare

Expenses/Wage revision

10.68 16.74 8.16 5.03 2.49

Operating profit before working Capital 3608.44 2799.02 2255.94 1818.99 1511.01

Increase/Decrease :

Loans Disbursed (Net) (19755.37) (15496.04) (12701.30) (7702.77) (8311.79)

Other Current Assets (349.11) (252.19) (284.71) 50.25 (411.85)

Increase/Decrease in Miscellaneous Expenditure

(28.78)

Loans & Advances (139.03) 100.14 (101.65) 109.73 (232.00)

Current Liabilities and provisions 901.54 216.44 664.65 24.66 602.90

Cash flow before extraordinary items (15733.53) (12632.63) (10167.07) (5699.14) (6870.51)

Extraordinary items 0.00 0.00 0.00 0.00 0.00

Cash Inflow/Outflow from operations before Tax (15733.53) (12632.63) (10167.07) (5699.14) (6870.51)

Income Tax paid (865.72) (811.34) (595.85) (570.65) (310.34)

Income Tax Refund

13.51

Net Cash flow from Operating Activities (16599.25) (13443.97) (10762.92) (6269.79) (7167.34)

Cash Flow From Investing Activities :

Sale / decrease of Fixed Assets 0.64 0.05 0.05 0.08 0.06

Purchase of Fixed Assets (7.42) (1.51) (2.60) (1.58) (44.13)

Increase/decrease in Capital Works in Progress (0.55) (1.73)

31.27

Plant & Machinery (Lease Equalisation) 0.00

0.27 0.24 14.21

Investments in Subsidiaries 0.00 (0.05) (0.07) 0.10 (0.50)

Dividend / Interest and profit on sale of investment 3.49 5.50 5.41 8.74 2.29

Other Investments (22.39) 5.95 28.31 (6.57) (41.86)

Net Cash Used in Investing Activities (26.23) 8.21 31.37 1.01 (38.66)

Cash Flow From Financial Activities :

Issue of Shares

997.19

Issue of Bonds 14023.96 12283.30 12808.90 7258.30 5299.70

Short Term Loans (Net) 3400.00 (750.00) (1080.00) 340.00 (31.10)

Loan Against Fixed Deposits (Net) 565.92 1675.12 0.00 (171.00) 171.00

Raising of Long Term Loans 7855.00 8004.50 4750.00 4338.00 3483.00

Repayment of Long Term Loans (5870.00) (4473.00) (4449.00) (4885.71) (1563.00)

Redemption of Bonds (3710.91) (1981.86) (892.30) (144.70) (272.14)

Foreign Currency Loans (Net) 2214.60 486.88 (40.46) 335.61 (412.17)

Interest Subsidy Fund (211.62) (245.45) (157.81) (164.88) 31.30

Unclaimed Bonds (Net) (16.31) 21.87 0.09 (0.01) 0.00

Payment of Final Dividend (including Corporate

Dividend Tax) of Previous year

(200.76) (181.28) (134.29) (134.29) (189.61)

Payment of Interim Dividend (including Corporate

Dividend Tax) of Current year (468.44) (402.85) (355.85) (335.71) (165.34)

Net Cash in-flow from Financing Activities 17581.44 14437.23 10449.28 6435.61 7348.83

Net Increase/Decrease in Cash & Cash 955.96 1001.47 (282.27) 166.83 142.83

Add : Cash & Cash Equivalents at beginning of the

period 1394.30 392.83 674.50 507.67 364.84

Cash & Cash Equivalents at the end of the period 2350.26 1394.30 392.23 674.50 507.67

Details of Cash & Cash Equivalents at the end of

the period:

Cheques in hand,Imprest with Postal authority &

Balances with Banks

248.21 3.88 2.04 (20.00) 43.41

Fixed Deposits with Scheduled Banks 2102.05 1390.42 390.19 694.50 464.26

2350.26 1394.30 392.23 674.50 507.67

Page 40: Shelf Prospectus

38

GENERAL INFORMATION

Our Company was incorporated on July 16, 1986 as a public limited company under the Companies Act. We received a

certificate for commencement of business on December 31, 1987. The GoI incorporated our Company as a financial

institution in order to finance, facilitate and promote power sector development in India with the President of India

holding 100% of our equity share capital at the time of incorporation and at present its shareholding is 73.72%.

Registered and Corporate Office

‘Urjanidhi’,

1, Barakhamba Lane,

Connaught Place,

New Delhi- 110 001, India.

Tel.: +91 11 2345 6000

Fax: +91 11 2341 2545

Website: www.pfc.gov.in

Registration

Details Registration/Identification number

Registration Number 24862

Corporate Identity Number L65910DL1986GOI024862

RBI Registration Number classifying Company as

Infrastructure Finance Company

B-14.00004

For details on changes in our Registered Office, see “History and Certain Corporate Matters” on page 91.

Address of the Registrar of Companies

Our Company is registered at the office of:

The Registrar of Companies

National Capital Territory of Delhi and Haryana

4th Floor, IFCI Tower, 61, Nehru Place

New Delhi 110 019, India

Tel: +91 (11) 2623 5704

Fax: +91 (11) 2623 5702

Company Secretary and Compliance Officer

Mr. J. S. Amitabh,

‘Urjanidhi’, 1, Barakhamba Lane,

Connaught Place,

New Delhi 110 001, India

Tel: +91 11 2345 6000

Fax: +91 11 2345 6285

E-mail: [email protected]

Website: www.pfc.gov.in

Investors may contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or post-Issue

related problems such as non-receipt of letters of allotment, credit of allotted Bonds in the respective beneficiary

account or refund orders, etc.

LEAD MANAGERS

SBI Capital Markets Limited*

202, Maker Tower E

Cuffe Parade

Mumbai 400 005, India

Tel: +91 (22) 2217 8300

Fax: +91 (22) 2218 8332

Email: [email protected]

Investor Grievance Email:

[email protected]

Website: www.sbicaps.com

Contact person: Mr. Puneet Deshpande

Compliance Officer: Mr. Bhaskar Chakraborty

SEBI Registration No.: INM000003531

ICICI Securities Limited

ICICI Centre, H.T. Parekh Marg

Churchgate

Mumbai 400 020, India

Tel: +91 (22) 2288 2460/ 70

Fax: +91 (22) 2282 6580

Email: [email protected]

Investor Grievance Email:

[email protected]

Website: www.icicisecurities.com

Contact person: Mr. Manvendra Tiwari

Compliance Officer: Mr. Subir Saha

SEBI Registration No.: INM000011179

Page 41: Shelf Prospectus

39

*The SEBI registration of one of the Lead Managers to the issue, SBI Capital Markets Limited was valid up to July 31, 2011.

The application for renewal of the certificate of registration in the prescribed manner has been made by SBI Capital

Markets Limited on April 29, 2011, to SEBI, three months before the expiry of the period of the certificate as required under

Regulation 9(1) of the SEBI (Merchant Bankers) Regulations, 1992. The approval of SEBI in this regard is currently

awaited.”

DEBENTURE TRUSTEE TO THE

BONDHOLDERS

PNB Investment Services Limited 10, Rakeshdeep Building,

Yusuf Sarai, Commercial Complex,

Gulmohar Enclave, New Delhi – 110049, India

Tel: +91 (11) 49495050

Fax: +91 (11) 41035057

Email: [email protected]

Website: www.pnbisl.com

Contact Person: Mr. J. K. Agarwal

SEBI Registration No.: IND000000510

REGISTRAR TO THE ISSUE

Karvy Computershare Private Limited

“Karvy House” 46, Avenue 4,

Street No. 1, Banjara Hills,

Hyderabad- 500 034, India.

Tel: +91 (1600) 3454001

Fax: +91 (40) 23431551

Email: [email protected]

Website: www.karvy.com

Contact Person: Mr. Murali Krishna

SEBI Registration No.: INR000000221

STATUTORY AUDITORS

Raj Har Gopal & Co. Chartered Accountants

412, Ansal Bhawan,

16, K.G. Marg,

New Delhi 110001, India

Tel: +91 (11) 4152 0698/ 4152 0699

Email: [email protected]

Firm Registration No.: 002074N

N.K. Bhargava & Co. Chartered Accountants

C-31, Acharya Nikaten, 1st Floor,

Opp Pocket One, Mayur Vihar,

Phase One, New Delhi – 110091, India

Tel: +91 (11) 22793650, 22752376

Email: [email protected]

Firm Registration No.: 000429N

LEGAL ADVISORS TO THE ISSUE

JurisPrudent Consulting Partners First Floor, C-17, Community Centre,

Janakpuri, New Delhi 110 058, India

Tel.: +91 (11) 3200 0177

Fax: +91 (11) 4158 8441

E-mail: [email protected]

Contact Person: Mr. Ajay Jain

ESCROW COLLECTION BANKS / BANKERS TO THE ISSUE

State Bank of India Capital Management Product-SBI

F.A.S.T., 31, Mahal Industrial

Esate, Off. Mahakali Caves Road,

Andheri (East) , Mumbai-400 093

Tel: +91 (22) 2867 4805

Fax: +91 (22) 2867 5060

Email: [email protected]

Contact Person: Mr. Ejaz Hussain

Website:www.statebankofindia.com

SEBI Registration No.:

INBI00000038

HDFC Bank Limited FIG-OPS Department,Lodha I,

Think Techno Campus, O-3-Level,

Next toKanjumarg Railway Station,

Kanjumarg (East)

Mumbai 400 042

Tel: +91 (22) 3075 2928

Fax: +91 (22) 2579 9801

Email:[email protected],f

[email protected],himanshu.ar

[email protected],

[email protected]

Contact Person: Mr. Deepak Rane

Website:www.hdfcbank.com

SEBI Registration No.:

INBI00000063

IDBI Bank Limited Unit No. 2, Corporate Park,

Near Swastik Chambers

Sion-Trombay Road,

Chembur, Mumbai 400 071

Tel: +91 (22) 6690 8402

Fax: +91 (22) 2528 6173

Email:[email protected]

n

Contact Person: Mr.

V.Jayananthan

Website:www.idbibank.com

SEBI Registration No.:

INBI00000076

ICICI Bank Limited 9 A, Phelps Building, A-Block,

Connaught Place,

New Delhi-110 001

Tel: +91 (11) 6631 0336/ 6631 0322

Kotak Mahindra Bank Limited 5th Floor, Dani Corporate Park, 158

CST Road, Kalina, Santacruz (E),

Mumbai 400 098

Tel: +91 (22) 6759 5336

Axis Bank Limited 148, Statesman House,

Barakhamba Road

New Delhi 110 001

Tel: +91 (11) 2331 1043 /

Page 42: Shelf Prospectus

40

Fax: +91 (11) 66310410/ 66310350

Email:[email protected],

[email protected],

[email protected]

Contact Person: Mr. Abhay

Singh/Mr.Mohit Saxena/Mr.Anil

Gadoo

Website:www.icicibank.com

SEBI Registration No.:

INBI00000004

Fax: +91 (22) 6759 5374

Email: [email protected]

Contact Person: Mr. Amit Kumar

Website:www.kotak.com

SEBI Registration No.:

INBI00000927

4152 1301

Fax: +91 (11) 2331 1054

Email:newdelhi.branchhead@

axisbank.com,amit.mishra@ax

isbank.com

Website:www.axisbank.com

Contact Person: Mr. Sandeep

Kumar/Ashish Dhall

SEBI Registration No.:

INBI00000017

Dhanlaxmi Bank Limited. Janmabhoomi Bhavan,

Janmabhoomi Marg, Fort,

Mumbai-400 001

Tel. : 022 - 22022535 / 61541857

Fax : 022 -22871637 /61541725

Email:venkataraghavan.ta@dhanba

nk.co.in

Contact Person : Mr.

Venkataraghavan.T.A

Website:www.dhanbank.com

SEBI Registration No. :

INBI00000025

IndusInd Bank CMS-Hub, Solitaire Corporate Park,

No. 1001, Building No. 10, Ground

Floor,

Guru Hargovindji Marg,

Andheri East, Mumbai - 400093

Tel. : (+91) (22) 6772 3943/42/41

Fax : (+91) (11) 6623 8021/6772

Email: :

[email protected]

Contact Person : Mr. Sanjay

Vasarkar

Website:www.indusind.com

SEBI Registration No. :

INBI00000002

LEAD BROKERS TO THE ISSUE

[●]

BANKERS TO THE COMPANY

State Bank of India Chanderlok Building branch,

36, Janpath,

New Delhi - 110 001, India.

Tel: +91 (11) 2332 9831

Fax: +91 (11) 2373 9198

Email: [email protected]

Website : www.statebankofindia.com

Contact Person: Mr. Rajinder Seth

Bank of India P.T.I Builiding, 4, Sansad Marg,

New Delhi – 110 001

Tel: +91 (11) 23765124, 23765125, 23765126

Fax: +91 (11) 23765123

Email:

[email protected]

Website: www.bankofindia.com

Contact Person: Mr. C.M. Sharma

IDBI Bank Limited Indian Red Cross Building,

1, Red Cross Road,

New Delhi - 110 001, India.

Tel: +91 (11) 6628 1025

Fax: +91 (11) 2375 2730

Email: [email protected]

Website: www.idbi.com

Contact Person: Mr. Jai Prakash Nathaniel

ICICI Bank Limited 9-A, Phelps Building,

A – Block,

Connaught Place,

New Delhi - 110 001, India.

Tel: +91 (11) 6631 0336

Fax: +91 (11) 6631 0410

Email: [email protected],

[email protected]

Website: www.icicibank.com

Contact Person: Mr. Abhay Singh, Mr. Mohit Saxena

HDFC Bank Limited

FIG – OPS Department,

- Lodha, I Think Techno Campus,

O-3 Level, Next to Kanjurmarg Railway Station,

Kanjurmarg (East),

Mumbai – 400 042, India.

Tel: +91 (22) 3075 2928

Fax: +91 (22) 2579 9801

Email: [email protected],

Andhra Bank

M-35, Connaught Circus branch,

New Delhi - 110 001, India.

Tel: +91 (11) 23415616

Fax: +91 (11) 2341 6043

Email: [email protected]

Website: www.andhrabank.in

Contact Person: Mr. B L Gupta

Page 43: Shelf Prospectus

41

[email protected]

Website: www.hdfcbank.com

Contact Person: Mr. Uday Dixit

CREDIT RATING AGENCIES

CRISIL Limited CRISIL House, Central Avenue

Hiranandani Business Park, Powai,

Mumbai 400 076, India

Tel: +91 (22) 3342 3000

Fax: +91 (22) 3342 3050

Website: www.crisil.com

ICRA Limited Building No. 8, 2

nd Floor,

Tower A, DLF Cyber City,

Phase- II,

Gurgaon 122 002, India

Tel: +91 (124) 4545 300

Fax: +91 (124) 4545 350

Website: www.icra.in

Credit Rating and Rationale

Letter dated August 25, 2011 of CRISIL assigning ‘AAA/Stable’ (Pronounced ‘Triple A with stable outlook’) rating for

our infrastructure bonds aggregating to ` 6,900 crores and letter dated September 7, 2011 of ICRA assigning ‘AAA’

with a ‘Stable’ outlook for our long-term infrastructure bonds of ` 6,900 crores (part of ` 27,500 crores long term

borrowings programmes for the financial year 2011-12).

For details in relation to the rationale for the credit rating by CRISIL and ICRA, see Annexure II.

Expert Opinion

Except the letters dated August 25, 2011 and September 7, 2011 issued by CRISIL and ICRA, respectively, in respect

of the credit rating for the Bonds, and the report dated August 27, 2011 on our financial statements and statement of tax

benefits dated August 27, 2011 issued by Raj Har Gopal & Co. and N.K. Bhargava & Co., Statutory Auditors of the

Company, the Company has not obtained any expert opinion.

Minimum Subscription

In terms of the SEBI Debt Regulations, an issuer undertaking a public issue of debt securities is required to disclose the

minimum amount of subscription that it proposes to raise through the issue in the offer document. In the event that an

issuer does not receive the minimum subscription disclosed in the offer, all application monies received in the public

issue are required to be refunded forthwith. The Company has decided to set no minimum subscription for this Issue.

Issue Programme

The Issue shall remain open for subscription during banking hours for the period indicated below,. except that the Issue

may close on such date as may be decided by the Board. In the event of an early closure of the Issue , the Company

shall ensure that notice is provided to the prospective investors through newspaper advertisements, at least three days

prior to such earlier date of Issue closure.

ISSUE PROGRAMME

ISSUE OPENS ON ISSUE CLOSES ON

[●] [●]

Page 44: Shelf Prospectus

42

CAPITAL STRUCTURE

Our share capital as on the date of this Shelf Prospectus is set forth below:

Aggregate value

(` in crore)

Authorised share capital

2,000,000,000 Equity Shares of ` 10 each 2,000.00

Issued, subscribed and paid up share capital

1,319,931,705 Equity Shares of ` 10 each 1,319.93

Securities premium account 4,088.62

Share capital history of Our Company:

The following is the history of the equity share capital of our Company, since its incorporation.

Date of Allotment Number of

equity shares

Face

Value

(`)*

Issue

price

per

share (`)

Nature of

Consideration

(cash, bonus,

consideration

other than cash)

Cumulative Share

Capital (`)

September 23, 1987 304,000 1,000 1,000 Cash 304,000,000

March 25, 1988 1,000,000 1,000 1,000 Cash 1,304,000,000

November 7, 1988 2,000,000 1,000 1,000 Cash 3,304,000,000

December 13, 1989 3,000,000 1,000 1,000 Cash 6,304,000,000

February 25, 1991 2,200,500 1,000 1,000 Cash 8,504,500,000

February 17, 1992 1,250,000 1,000 1,000 Cash 9,754,500,000

September 1, 1992 100,000 1,000 1,000 Cash 9,854,500,000

July 15, 1994 450,000 1,000 1,000 Cash 10,304,500,000

February 19, 2007 117,316,700 10 85* Cash 11,477,667,000

May 24, 2011 172,165,005 10 203# Cash 13,199,317,050

Total 1,319,931,705 13,199,317,050

* With effect from September 26, 2002, the equity shares of ` 1,000 each have been split into Equity Shares of the face

value of ` 10 each. Subsequently, PFC came up with an initial public offer in February 2007. After the Issue the

shareholding of the President of India, through the Ministry of Power (including shares held through its seven

nominees) was ` 10,304.50 million, i.e. 89.78% of the issued and paid up equity capital of our Company.

#In May 2011 our company came up with a Further Public Offer(FPO) comprising of Fresh Issue of 172,165,005

Equity Shares of ` 10 each and Offer for sale of 57,388,335 Equity Shares of ` 10 each. After the FPO, the

shareholding of the President of India, through the MoP, was reduced to 973,061,665 (along with its nominees) shares

i.e. 73.72% of the fully diluted present paid-up equity capital of our Company.The retail investors and eligible

employees were issued equity shares at a price of ` 192.85 per equity share.

Page 45: Shelf Prospectus

43

Shareholding Pattern of the Company as on June 30, 2011

Category of Shareholder No. of

Share

holders

Total No. of

Shares

Total No. of

Shares held in

Dematerialize

d Form

Total Shareholding as a

% of total No. of

Shares

As a %

of (A+B)

As a % of

(A+B+C)

(A) Shareholding of Promoter and

Promoter Group

(1) Indian

Individuals / Hindu Undivided Family 1 700 - - -

Central Government / State Government(s) 1 973,060,965 973,060,965 73.72 73.72

Sub Total 2 973,061,665 973,060,965 73.72 73.72

(2) Foreign

Total shareholding of Promoter and

Promoter Group (A)

2 973,061,665 973,060,965 73.72 73.72

(B) Public Shareholding

(1) Institutions

Mutual Funds / UTI 134 73,529,083 73,529,083 5.57 5.57

Financial Institutions / Banks 38 11,812,935 11,812,935 0.89 0.89

Insurance Companies 6 35,385,920 35,385,920 2.68 2.68

Foreign Institutional Investors 158 79,756,062 79,756,062 6.04 6.04

Sub Total B(1) 336 200,484,000 200,484,000 15.19 15.19

(2) Non-Institutions

Bodies Corporate 1,485 96,990,240 96,990,240 7.35 7.35

Individuals

Individual shareholders holding nominal

share capital up to ` 1 lakh

248,73

5

40,661,629 40,653,253 3.08 3.08

Individual shareholders holding nominal

share capital in excess of ` 1 lakh

102 5,808,702 5,808,702 0.44 0.44

Any Others (Specify) 2,519 2,925,469 2,925,469 0.22 0.22

Non Resident Indians 2,180 963,367 963,367 0.07 0.07

Clearing Members 314 1,933,810 1,933,810 0.15 0.15

Trusts 24 28,052 28,052 - -

Foreign Nationals 1 240 240 - -

Sub Total B(2) 252,841 146,386,040 146,377,664 11.09 11.09

Total Public shareholding (B) = B(1)+B(2) 253,177 346,870,040 346,861,664 26.28 26.28

Total (A)+(B) 253,179 1,319,931,705 1,319,922,629 100.00 100.00

(C ) Shares held by the Custodians and

against which Depository Receipts have

been issued

- - - - -

Total (A)+ (B) + (C) 253,179 1,319,931,705 1,319,922,629 100 100.00

List of top 10 holders of Equity Shares of the Company as on June 30, 2011:

Sr. No. Name No. of Equity Shares of

face value of ` 10 each

% to the total Equity Share

Capital of the company

1 President of India (including Nominees) 973,061,665 73.72

2 Life Insurance Corporation of India 32,868,526 2.49

3 ICICI Prudential Life Insurance 22,578,442 1.71

4 HDFC Standard Life Insurance Company Limited 14,589,423 1.11

5 LIC of India - Market Plus-1 12,932,264 0.98

6 Reliance Retail Limited 9,800,000 0.74

7 Morgan Stanley Mauritius Company Limited 7,478,960 0.57

8 Bajaj Holdings and Investment Limited 7,389,144 0.56

9 Federated Kaufmann Fund 5,486,500 0.42

10 LIC of India - Market Plus 5,346,442 0.40

Total 1,091,530,666 82. 70%

Page 46: Shelf Prospectus

44

List of top 10 Non-convertible Debenture/Bondholders of the Company as on June 30, 2011:

Unsecured Non-convertible Debentures/Bonds

The following is the list of the top ten holders of unsecured, non-convertible debenture/bondholders of our Company as

on June 30, 2011.

Please refer to Annexure - IV

Secured Non-convertible Debentures/Bonds

The following is the list of the top ten holders of Secured Non-convertible Debenture/Bondholders of our Company as

on June 30, 2011.

Please refer to Annexure - IV

Debt - Equity Ratio

(` in crores)

Standalone Consolidated

Description Pre Issue^ Post Issue*# Pre Issue^ Post Issue*#

Debts

Short term debt 6,291.04 6,291.04 6,291.04 6,291.04

Long term debt 7,9307.53 86,207.53 7,9307.53 86,207.53

Total Debt 85,598.57 92,498.57 85,598.57 92,498.57

Shareholders’ Funds

Share Capital 1,147.77 1,147.77 1,147.77 1,147.77

Reserves & Surplus 14,034.72 14,034.72 14,093.04 14,093.04

(-) Revaluation Reserve 0.00 0.00 0.00 0.00

Net Reserves(Net of Revaluation) 14,034.72 14,034.72 14,093.04 14,093.04

(-) Reserve for bad and doubtful debts

u/s 36(1)(vii a)(c) of IT Act,1961 984.88 984.88 984.88 984.88

(-) Miscellenous Expenditure (to the

extent not written off)

0.20 0.20 0.20 0.20

Net Worth 14,197.41 14,197.41 14,255.73 14,255.73

Long Term Debt / Net Worth 5.59 6.07 5.56 6.05 ^ Pre Issue Standalone and Consolidated figures are as on March 31, 2011.

* Post Issue Standalone & Consolidated Ratios has been calculated based upon the assumptions that the issue of

` 6900 Crores is fully subscribed and there is no change in Shareholders' funds and Short term Debt.

# Any changes in Debt and Shareholders’ funds after March 31, 2011 has not been considered.

1. None of the Equity Shares of the Company are pledged or otherwise encumbered.

2. Our Company has not issued any Equity Shares or debt securities issued for consideration other than cash,

whether in whole or part, since its incorporation.

3. Our Company has not, since incorporation, issued any debt securities at a premium or at a discount, or in

pursuance of an option.

4. For details of the outstanding borrowings of the Company as on June 30, 2011, see “Financial Indebtedness” on

page 115.

Page 47: Shelf Prospectus

45

OBJECTS OF THE ISSUE

Issue Proceeds

This is a public issue of the Bonds up to ` 6,900 crore, which does not exceed of the incremental infrastructure

investment made by the Company in Fiscal 2011, to be issued at par in one or more tranches. The funds raised through

this Issue will be utilized towards ‘infrastructure lending’ as defined by the RBI in the regulations issued by it from time

to time, after meeting the Issue expenses.

The Bonds will be in the nature of debt and will be eligible for capital allocation and accordingly will be utilized in

accordance with statutory and regulatory requirements including requirements of the MoF.

The main objects clause of our Memorandum of Association permits our Company to undertake its existing activities as

well as the activities for which the funds are being raised through this Issue.

In accordance with the SEBI Debt Regulations, our Company will not utilize the proceeds of the Issue for providing

loans to or acquisition of shares of our Subsidiaries. Further, our Company is a public sector enterprise and, as such, we

do not have any identifiable ‘group’ companies or ‘companies under the same management’.

The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any acquisition, including

by way of a lease, of any property.

Issue Expenses

A portion of the Issue proceeds will be used to meet Issue expenses. The details of the issue expenses shall be updated

in the respective tranche prospectus(es):

Particulars Amount

(` in lakhs)

Percentage of net proceeds

(Issue proceeds less Issue

expenses) of the Issue (in

%)

Percentage of total

expenses of the Issue (in %)

Fees payable to Intermediaries

To the Lead Managers [●] [●] [●]

To the Registrar to the Issue [●] [●] [●]

To the Advisors [●] [●] [●]

To the Debenture Trustee [●] [●] [●]

For advertising and marketing [●] [●] [●]

Selling and Brokerage commission [●] [●] [●]

Other Miscellaneous Expenses [●] [●] [●]

Total [●] [●] [●]

Monitoring of Utilization of Funds

In terms of the SEBI Debt Regulations, there is no requirement for appointment of a monitoring agency in relation to

the use of proceeds of the Issue. Our Board of Directors shall monitor the utilisation of the proceeds of the Issue. Our

Company will disclose in our financial statements for the relevant fiscal commencing from Fiscal 2012, the utilization

of the proceeds of the Issue under a separate head along with any details in relation to all such proceeds of the Issue that

have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue. The

Company shall also file these along with term sheets to the Infrastructure Division, Department of Economic Affairs,

MoF, within three months from the end of financial year. We shall utilize the proceeds of the Issue only upon the

execution of the documents for creation of security as stated in this Shelf Prospectus in the section titled ― ”Terms of

the Issue – Security” on page 144 and upon the listing of the Bonds.

Page 48: Shelf Prospectus

46

Raj Har Gopal & Co. N.K.Bhargava & Co.

Chartered Accountants, Chartered Accountants,

412, Ansal Bhawan, C-31, Ist Floor, Acharya Niketan,

16, K.G. Marg Mayur Vihar Phase-I

New Delhi – 110 001 New Delhi – 110 091.

Ph no.011 41520698,41520699 Ph no. 011 22752376

E-mail:[email protected] E-mail: [email protected]

STATEMENT OF TAX BENEFITS

Under the current tax laws, the following possible tax benefits, inter alia, will be available to the Debenture Holder.

This is not a complete analysis or listing of all potential tax consequences of the subscription, ownership and disposal

of bond, under the current tax laws presently in force in India. The benefits are given as per the prevailing tax laws and

may vary from time to time in accordance with amendments to the law or enactments thereto. The Debenture Holder is

advised to consider in his own case the tax implications in respect of subscription to the Debentures after consulting his

tax advisor as alternate views are possible. We are not liable to the Debenture Holder in any manner for placing

reliance upon the contents of this statement of tax benefits.

A. INCOME TAX

1. Deduction u/s 80CCF

(a) According to section 80CCF, an amount not exceeding Rupees twenty thousand invested in long term

infrastructure bonds shall be allowed to be deducted from the total income of an Individual or Hindu

Undivided Family. This deduction shall be available over and above the aggregate limit of Rs. One

Lakh as provided under sections 80C, 80CCC and 80CCD read with section 80CCE;

(b) Section 80CCF reads as “In computing the total income of an assessee, being an individual or a Hindu

undivided family, there shall be deducted, the whole of the amount, to the extent such amount does

not exceed twenty thousand rupees, paid or deposited, during the previous year relevant to the

assessment year beginning on the 1st day of April, 2012, as subscription to long term infrastructure

bonds as may, for the purposes of this section, be notified by the Central Government

2. No income tax is deductible at source on interest on debentures as per the provisions of section 193 of the

I.T. Act in respect of the following:

(a) In case the payment of interest on debentures to resident individual Debenture Holder by company by

an account payee cheque and such debentures being listed on a recognized stock exchange in India,

provided the amount of interest or the aggregate of the amounts of such interest paid or likely to be

paid during the financial year does not exceed Rs 2500;

(b) When the Assessing Officer issues a certificate on an application by a Debenture Holder on

satisfaction that the total income of the Debenture Holder justifies nil/lower deduction of tax at source

as per the provisions of Section 197(1) of the I.T. Act and that certificate is filed with the Company

before the prescribed date of closure of books for payment of bond interest.

(c) When the resident Debenture Holder (not being a company or a firm or a senior citizen) submits a

declaration to the payer in the prescribed Form 15G verified in the prescribed manner to the effect

that the tax on his estimated total income of the financial year in which such income is to be included

in computing his total income will be ‘nil’ as per the provisions of Section 197A (1A) of the I.T. Act.

Under Section 197A (1B) of the I.T. Act, Form 15G cannot be submitted nor considered for

exemption from deduction of tax at source if the aggregate of income of the nature referred to in the

said section, viz. dividend, interest, etc as prescribed therein, credited or paid or likely to be credited

or paid during the financial year in which such income is to be included exceeds the maximum

amount which is not chargeable to tax. To illustrate, the maximum amount of income not chargeable

to tax in case of individuals (other than women assessees and senior citizens) and HUFs is Rs

180,000, in case of women assesses is Rs.190, 000, in case of senior citizen who are 60 or more years

of age is Rs. 250,000 and in case of senior citizen who are 80 or more years of age is Rs. 500,000 for

Page 49: Shelf Prospectus

47

financial year 2011-12. Senior citizens, who are 60 or more years of age at any time during the

financial year, enjoy the special privilege to submit a self declaration to the payer in the prescribed

Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A (1C)

of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid exceed the

maximum amount not chargeable to tax i.e. Rs 250,000 or Rs. 5,00,000 for very senior citizen for FY

2011-12, provided tax on his estimated total income of the financial year in which such income is to

be included in computing his total income will be nil.

(d) On any securities issued by a company in a dematerialized form listed on recognized stock exchange

in India. (w.e.f. 1.06.2008).

In all other situations, tax would be deducted at source as per prevailing provisions of the I.T. Act;

3. Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed debenture is treated

as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its

transfer.

Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed

securities are subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of

acquisition or 10% of capital gains without indexation of the cost of acquisition. The capital gains will be

computed by deducting expenditure incurred in connection with such transfer and cost of acquisition/

indexed cost of acquisition of the debentures from the sale consideration.

In case of an individual or HUF, being a resident, where the total income as reduced by the long term capital

gains is below the maximum amount not chargeable to tax i.e. Rs 180,000 in case of all individuals, Rs

190000 in case of women, Rs 250,000 in case of senior citizens and Rs. 500,000 in case of very senior

citizens, the long term capital gains shall be reduced by the amount by which the total income as so reduced

falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such

long-term capital gains shall be computed at the rate of ten per cent in accordance with and the proviso to

sub-section (1) of section 112 of the I.T. Act read with CBDT Circular 721 dated September 13, 1995.

A 2% education cess and 1% secondary and higher education cess on the total income tax (including

surcharge) is payable by all categories of tax payers.

4. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period of not

more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the

provision of the I.T. Act.

The provisions related to minimum amount not chargeable to tax, surcharge and education cess described at

para 3 above would also apply to such short-term capital gains.

5. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed as

business income or loss in accordance with and subject to the provisions of the I.T. Act.

6. (i) Under section 54 EC of the Act and subject to the conditions and to the extent specified therein, long term

capital gains arising to the bondholders on transfer of their bonds in the company shall not be chargeable to

tax to the extent such capital gains are invested in certain notified bonds within six months from the date of

transfer. If only part of the capital gain is so invested, the exemption shall be proportionately reduced.

However, if the said notified bonds are transferred or converted into money within a period of three years

from their date of acquisition, the amount of capital gains exempted earlier would become chargeable to tax

as long term capital gains in the year in which the bonds are transferred or converted into money. Where

the benefit of section 54EC of the Act has been availed of on investments in the notified bonds, a deduction

from the income with reference to such cost shall not be allowed under section 80 C of the Act.

(ii) As per the provisions of section 54F of the Act and subject to conditions specified therein, any long-

term capital gains (not being residential house) arising to bondholder who is an individual or Hindu

Undivided Family, are exempt from capital gains tax if the entire net sales considerations is utilised, within

a period of one year before, or two years after the date of transfer, in purchase of a new residential house, or

for construction of residential house within three years from the date of transfer. If part of such net sales

consideration is invested within the prescribed period in a residential house, then such gains would be

chargeable to tax on a proportionate basis. Provided that the said bondholder should not own more than one

residential house at the time of such transfer. If the residential house in which the investment has been

Page 50: Shelf Prospectus

48

made is transferred within a period of three years from the date of its purchase or construction, the amount

of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year

in which such residential house is transferred. Similarly, if the shareholder purchases within a period of two

years or constructs within a period of three years after the date of transfer of capital asset, another

residential house (other than the new residential house referred above), then the original exemption will be

taxed as capital gains in the year in which the additional residential house is acquired.

7. As per section 56(2)(vii) of the I.T. Act, in case where individual or Hindu undivided Family receives

debentures from any person on or after 1st October, 2009

A. without any consideration, aggregate fair market value of which exceeds fifty thousand rupees, then

the whole of the aggregate fair market value of such bonds/debentures or;

B. for a consideration which is less than the aggregate fair market value of the debenture by an amount

exceeding fifty thousand rupees, then the aggregate fair market value of such property as exceeds

such consideration;

shall be taxable as the income of the recipient.

Provided further that this clause shall not apply to any sum of money or any property received—

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor, as the case may be; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical

institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

B. WEALTH TAX

Wealth-tax is not levied on investment in debentures under section 2(ea) of the Wealth-tax Act, 1957.

C. Proposals made in Direct Taxes Code

The Hon’ble Finance Minister has presented the Direct Tax Code Bill, 2010 (‘DTC Bill’) on August 30, 2010,

which is proposed to be effective from April 1, 2012. The DTC Bill is likely to be presented before the Indian

Parliament. Accordingly, it is currently unclear what effect the Direct Tax Code would have on the investors.

For Raj Har Gopal & Co. For N.K.Bhargava & Co.

Chartered Accountants Chartered Accountants

Firm’s Regn. No.: 002074N Firm’s Regn. No.: 000429N

G.K. Gupta N.K.Bhargava

Partner Partner

Membership no. 81085 Membership no.080624

Place: New Delhi

Date: August 27, 2011

Page 51: Shelf Prospectus

49

SECTION IV - ABOUT THE COMPANY

INDUSTRY OVERVIEW

The information in this section has not been independently verified by us, the Lead Managers or any of our or their

respective affiliates or advisors. The information may not be consistent with other information compiled by third parties

within or outside India. Industry sources and publications generally state that the information contained therein has

been obtained from sources it believes to be reliable, but their accuracy, completeness and underlying assumptions are

not guaranteed and their reliability cannot be assured. Industry and Government publications are also prepared based

on information as of specific dates and may no longer be current or reflect current trends. Industry and Government

sources and publications may also base their information on estimates, forecasts and assumptions which may prove to

be incorrect. Accordingly, investment decisions should not be based on such information. Figures used in this section

are presented as in the original sources and have not been adjusted, restated or rounded off for presentation in this

Shelf Prospectus.

The Indian Economy

India has an estimated population of 1,189,172,906 people as at July 2011, with an estimated gross domestic product

(“GDP”) calculated on a purchasing power parity basis of approximately U.S.$ 4.05 trillion in 2010. This makes it the

fifth largest economy in the world in terms of GDP after the European Union, United States of America, China and

Japan. (Source: CIA World Factbook 2011)

In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong

domestic demand - and growth exceeded 8% year-on-year in real terms. (Source: CIA World Factbook 2011). By way

of comparison, the below table illustrates the GDP growth in 2010 for certain other countries:

Country GDP Growth in 2010 (%)*

Singapore 14.5

India 10.4

China 10.3

Brazil 7.5

Japan 3.9

United States 2.8

United Kingdom 1.3

*adjusted for inflation

(Source: CIA World Factbook 2011)

In the past, India’s GDP has grown at an average rate of 8.8% between Fiscal 2003 and Fiscal 2008. As a result of the

global economic downturn, this growth trajectory was impeded in Fiscal 2009, with the growth rate of India's GDP

decelerating to 5.9% in the second half of Fiscal 2009, compared to 7.3% in Fiscal 2008. (Source: RBI, Macroeconomic

and Monetary Developments: First Quarter Review: 2009-10 ("RBI First Quarter Review")

The Indian economy witnessed robust recovery in growth in the last quarter of fiscal 2010. The Industrial Outlook

Survey of the RBI indicated further improvement in several parameters of the business environment for the three

months ended September 30, 2010. The Professional Forecasters’ Survey conducted by the RBI in June 2010 places the

overall (median) GDP growth rate for fiscal 2011 at 8.4%, higher than 8.2% reported in the previous round of the

survey. (Source: Macroeconomic and Monetary Developments: First Quarter Review Fiscal 2011).

During the first quarter of Fiscal 2011, India's GDP grew by 8.8%, compared with a growth rate of 6.0% during the first

quarter of Fiscal 2010.

(Source: http://mospi.nic.in/Mospi_New/upload/PRESS_NOTE_Q1_2010_11.pdf accessed on September 3, 2010)

Page 52: Shelf Prospectus

50

THE INDIAN POWER SECTOR

Structure of the Indian Power Sector

The following diagram depicts the structure of the Indian power industry for generation, transmission, distribution and

consumption:

Legend:

IPPs Independent Power Producer

CPUs Central Power Utilities

SEBs State Electricity Boards

STUs State Transmission Utilities

SPUs State Power Utilities

PGCIL Powergrid Corporation of India

Limited

EDs Electricity Departments

Discoms Distribution Companies

Overview of the Indian power sector

India has continuously experienced shortages in energy and peak power requirements. According to the Central

Electricity Authority's ("CEA") monthly review of the power sector ("CEA Monthly Review") published in June 2011,

the provisional total energy deficit and peak power deficit for March 2011 was approximately 5% and 9.9%,

respectively. The shortages in energy and peak power have been primarily due to the sluggish progress in capacity

addition. The Indian economy is based on planning through successive five year plans ("Five Year Plans") that set out

targets for economic development in various sectors, including the power sector. During the 9th Five Year Plan (1997-

2002) ("9th

Plan"), capacity addition achieved was 19,015 MW, which was 47.5% of the 40,245 MW targeted under the

9th Plan. During the course of the 10th Five Year Plan (2002 to 2007) ("10th Plan"), capacity addition achieved was

21,180 MW, which was 51.6% of the 41,110 MW targeted under the 10th

Plan. (Source: White Paper on Strategy for

11th

Plan, prepared by the CEA and the Confederation of Indian Industry, August 2007 (the "White Paper")). The

current revised capacity target for the 11th

Five Year Plan (2007-2012) ("11th

Plan") is 78,700 MW. As of July 31, 2011,

capacity addition achieved over the 11th Plan has been 61.02% of the target addition or 48,028.91 MW. The total

installed power generation capacity in India was 180358.12 MW as of July 31, 2011. (Source: CEA Monthly Review

(July 2011))

Power Demand in India

Rapid growth of the economy places a heavy demand on electric power. Reforms in the power sector, to make it

efficient and more competitive, have been under way for several years and while there has been some progress, shortage

of power and lack of access continues to be a major constraint on economic growth. The persistent shortages of

electricity both for peak power and energy indicate the need for improving performance of the power sector in the

country (Source: website of the Planning Commission of India ("Planning Commission")).

Page 53: Shelf Prospectus

51

Although power generation capacity has increased substantially in recent years, it has not kept pace with the continued

growth of the Indian economy, despite low per capita electricity consumption. As set forth below, per capita

consumption of power in India remains relatively low compared to other major economies:

(Source: IEA, Key World Energy Statistics, 2010)

The low per capita consumption of electricity in India compared to the world average presents significant potential for

sustainable growth in the demand for electric power in India. The total energy consumption in India is estimated to

grow to approximately 1,280 million tonnes of oil equivalent ("Mton") by Fiscal 2030. (Source: World Energy Outlook

2008, IEA). This implies growth of 3.5% CAGR in India's energy requirement over the next 25-30 years, reflecting the

huge potential for investments in the energy sector in India.

Power Supply in India

Historical Capacity Additions

Each successive Five-Year Plan of the GoI has had increased targets for the addition of power generation capacity. The

energy deficit in India is a result of insufficient progress in the development of additional energy capacity. In each of

the last three Five-Year Plans (the 8th

, 9th

, and 10th

Five-Year Plans, covering fiscal 1992 to fiscal 2007), less than

55.0% of the targeted additional energy capacity level was added. According to the White Paper, India added an

average of approximately 20,000 MW to its energy capacity in each of the 9th

Plan and 10th

Plan periods.

The total capacity addition during the past 25 years between the 6th

Five Year Plan and the 10th

Plan was approximately

92,000 MW. The latest revised target capacity addition for the 11th

Plan is 78,700 MW (61.02% of which had been

achieved as of July 31, 2011) (Source: CEA Monthly Review (July 2011)), and this is expected to result in significant

investments in the power generation sector.

Current Capacity

Out of India’s total installed capacity of 180358.12 MW as on July 31, 2011, the installed capacity of central power

sector utilities, state sector entities and private sector companies accounted for approximately 31.4%, 45.92% and

22.72%, respectively. The following table sets forth a summary of India's energy generation capacity as of July 31,

2011 in terms of fuel source and ownership:

(In MW)

Sector Thermal Nuclear Hydro RES* Total

Central 42907.23 4,780.00 8,885.40 0.00 56572.63

State 52291.73 0.00 27296.00 3225.92 82813.65

Private 22110.52 0.00 1925.00 16936.32 40971.84

Total 117309.48 4,780.00 38106.40 20162.24 180358.12

*RES = Renewable energy sources

(Source: CEA Monthly Review (July 2011))

Demand-Supply Imbalance in India

Page 54: Shelf Prospectus

52

The Indian power sector has historically been beset by energy shortages which have been rising over the years. In fiscal

2010, peak energy deficit was 12.7% and total energy deficit was 10.1%. The demand for electricity has consistently

exceeded the supply, and the demand-supply gap has been widening. The following table provides the peak and

normative shortages of power in India for the periods indicated:

Period Peak

Demand

(MW)

Peak Met

(MW)

Peak

Deficit/

Surplus

(MW)

Peak

Deficit/

Surplus

(%)

Power

Requirement

(MU)

Power

Availability

(MU)

Power

Deficit/

Surplus

(MU)

Power

Deficit/

Surplus

(%)

Fiscal 2003 81,492 71,547 (9,945) (12.2) 545,983 497,890 (48,093) (8.8)

Fiscal 2004 84,574 75,066 (9,508) (11.2) 559,264 519,398 (39,866) (7.1)

Fiscal 2005 87,906 77,652 (10,254) (11.7) 591,373 548,115 (43,258) (7.3)

Fiscal 2006 93,255 81,792 (11,463) (12.3) 631,757 578,819 (52,938) (8.4)

Fiscal 2007 100,715 86,818 (13,897) (13.8) 690,587 624,495 (66,092) (9.6)

Fiscal 2008 108,866 90,793 (18,073) (16.6) 739,345 666,007 (73,338) (9.9)

Fiscal 2009 109,809 96,685 (13,124) (12.0) 774,324 689,021 (85,303) (11.1)

Fiscal 2010 119,166 104,009 (15,157) (12.7) 830,594 746,644 (83,950) (10.1)

Fiscal 2011 (April

– December 2010)

119,437 107,286 (12,151) (10.2) 638,181 582, 225 (55,956) (8.8)

(Source: CEA Power Scenario at a Glance, January 2011)

The total Indian power deficit of 10.1% in fiscal 2010 can be compared to power deficits of 11.1% and 9.9% in fiscal

2009 and fiscal 2008, respectively. Similarly, the total Indian peak deficit of 12.7% can be compared to peak deficits of

12.0% and 16.6% in fiscal 2009 and fiscal 2008 (Source: www.powermin.nic.in).

The deficits in electric energy and peak power requirements vary across different regions in India. The peak deficit was

14.1% in the western region of the country, followed by 13.5% in the north-eastern region of the country in July 2011.

The larger deficit in the former regions is a result of the slow development progress of additional power generation

capacity in these areas. The following table outlines the peak and normative power shortages in India for the period

April 2011 – July 2011 across the regions of India:

April 2011 - July 2011

Region Energy (MU) Deficit % Peak Deficit%

Requirement Demand (MW)

Northern 92,605 -4.3 41,429 -10.4

Western 92,793 -9.8 39,566 -14.8

Southern 82,774 -5.2 33,937 -7.2

Eastern 32,430 -3.7 14,361 -6.7

North Eastern 3,683 -9.6 1,920 -13.5

All India 304,286 -6.2 126,830 -9.9

*Provisional

(Source: CEA Monthly Review (July 2011))

Demand Projections

To deliver a sustained economic growth rate of 8.0% through to fiscal 2032, India needs, at the least, to increase its

primary energy supply between three and four times and its electricity generation capacity between five and six times

based on fiscal 2004 levels. With fiscal 2004 as a baseline, India's commercial energy supply would need to grow from

5.2% to 6.1% per annum while its total primary energy supply would need to grow at 4.3% to 5.1% annually. Further,

power generation capacity must increase to around 800,000 MW by fiscal 2032 from the fiscal 2004 capacity levels of

around 160,000 MW inclusive of all captive plants. (Source: Planning Commission, Integrated Energy Policy Report of

Assumed GDP

Growth (%)

Electricity

Generation

required (BU)

Peak Demand

(GW)

Installed

Capacity (GW)

Capacity

Addition

Required (GW)*

By fiscal 2012 8.0 1,097 158 220 71

9.0 1,167 168 233 84

By fiscal 2017 8.0 1,524 226 306 157

9.0 1,687 250 337 188

By fiscal 2022 8.0 2,118 323 425 276

9.0 2,438 372 488 339

* Based on the existing installed capacity of 149 GW in India.

Page 55: Shelf Prospectus

53

the Expert Committee on Power, August 2006 (the "IEP report August 2006"). This represents a need for the substantial

augmentation of power generation capacity. Such investment in power generation will require increased investment in

power transmission and distribution if the additional power is to be effectively disseminated among potential customers.

The table below lays out the projected additional capacity needed by fiscal 2012, fiscal 2017 and fiscal 2022 under

different GDP growth rate scenarios:

(Source: IEP report August 2006)

Future Capacity Additions

11th

Plan

The MoP's proposed sector-wise and mode-wise capacity addition for the 11th

Plan is as follows:

Thermal (MW) Nuclear (MW) Hydro (MW) Total (MW)

Central 24,840 3,380 8,654 36,874

State 23,301 0.00 3,482 26,783

Private 11,552 0.00 3,491 15,043

Total 59,693 3,380 15,627 78,700

(Source: CEA Monthly Review (July 2011))

Additionally, the aim for the 11th

Plan is to achieve a capacity addition of 15,000 MW from renewable fuels. (Source:

www.mnre.gov.in, website of the Ministry of New and Renewable Energy ("MNRE")

The total fund requirement to achieve the 11th Plan target was estimated as ` 10,316.00 billion. This included total

estimated funding of ` 4,108.96 billion for generation projects (including nuclear projects) of which ` 1,237.92 billion

was envisaged for the public sector, ` 2,020.67 billion for the central sector and ` 850.37 billion for the private sector,

respectively. This also includes an estimated ` 1,400.00 billion for transmission system development (with ` 750.00

billion envisaged for the central sector and ` 650.00 billion for the public sector, respectively). Total fund requirement

for the distribution sector (including rural electrification) during the 11th Plan was estimated at ` 2,870.00 billion,

which was only for the public sector. (Source: White Paper)

12th Five Year Plan (2012-2017) (the "12th

Plan")

A tentative capacity addition of approximately 100,000 MW has been envisaged for the 12th

Plan. This comprises an

estimated 74,000 MW thermal power, 20,000 MW hydro power, 3,400 MW nuclear power and 2,500 MW from lignite,

respectively (Source: Base Paper, International Conclave on Key Inputs for Accelerated Development of Indian Power

Sector for Twelfth Plan and Beyond, 18-19 August, 2009, organized by the MoP and CEA ("International Conclave

August 2009")).

The total fund requirement to achieve the above targeted capacity addition is estimated at ` 11,000.00 billion, with an

estimated ` 4,950.00 billion being required for generation projects, an estimated ` 2,400.00 billion being required for

transmission projects and an estimated ` 3,710.00 billion being required for distribution projects. (Source: International

Conclave August 2009).

POWER TRANSMISSION AND DISTRIBUTION

In India, the transmission and distribution system is a three-tier structure comprised of regional grids, State grids and

distribution networks. The five regional grids, configured on a geographical contiguity basis, enable transfer of power

from a power surplus State to a power deficit State. The regional grids also facilitate the optimal scheduling of

maintenance outages and better co-ordination between power plants. These regional grids are to be gradually integrated

to form a national grid, whereby surplus power from a region could be redirected to another region facing power

deficits, thereby allowing a more optimal utilization of the national generating capacity.

Most inter-regional and inter-State transmission links are owned and operated by Power Grid Corporation of India

Limited though some are jointly owned by the SEBs. State grids and distribution networks are mostly owned and

operated by the respective SEBs, STUs, distribution companies, or State governments (through State electricity

departments). A direct consequence of the high Aggregate Technical and Commercial ("AT&C") losses that are

experienced by the Indian power sector is the inadequate financial condition of SEBs and SPUs thereby restricting the

SEBs from making any meaningful investments in generation and the modernization of the transmission and

Page 56: Shelf Prospectus

54

distribution network.

POLICY INITIATIVES AND ECONOMIC REFORMS IN INDIA

Since 1991, India has witnessed reforms across the policy spectrum in the areas of fiscal and industrial policy, trade and

finance. Some of the key reform measures are:

• Industrial Policy Reforms: Removal of capacity licensing and opening up various sectors to FDI;

• Trade Policy Reforms: Lowering of import tariffs and restrictions on imports, across industries; and

• Monetary Policy and Financial Sector Reforms: Lowering interest rates, relaxation of restrictions on fund movement

and the introduction of private participation in insurance sector.

In addition, FDI has been recognized as an important driver of economic growth in the country. The GoI has taken a

number of steps to encourage and facilitate FDI, and FDI is allowed in many key sectors of the economy, such as

manufacturing, services, infrastructure and financial services. For many sectors, 100% FDI is allowed on an automatic

basis, without prior approval from the Foreign Investment Promotion Board.

FDI inflows into India have accelerated since Fiscal 2007. From April 2000 through June 2011, FDI equity inflows into

the services sector (both financial and non-financial) of India amounted to ` 1,299.63 billion (US$ 29,087 million). In

addition, from August 1991 to June 2010, cumulative FDI equity inflows amounted to ` 6,035.26 billion (US$ 138,235

million). FDI inflows into India were US$ 34,835 million, US$ 37,838 million and US$ 37,763 million and US$ 30,380

million in Fiscal Years 2008, 2009, 2010 & 2011, respectively, and US$ 13,441 million up to June 2011. (Source:

Department of Industrial Policy and Promotion Fact Sheet, August 1991 to June 2011)

In recent years, in light of persistent power shortages and given the estimated rate of increase in demand for electricity

in India, the GoI has taken significant action to restructure the power sector, increase capacity, improve transmission,

sub-transmission and distribution, and attract investment to the sector. Some of the various strategies and reforms

adopted by the GoI and other initiatives in the power sector in India are summarized below:

Electricity Act, 2003 ("Electricity Act")

The most significant reform package was the introduction of the Electricity Act, which modified the legal framework

governing the electricity sector and was designed to alleviate many of the problems facing India’s power sector and to

attract capital for large scale power projects. The Electricity Act replaced the multiple legislations that previously

governed the Indian electricity sector. The most significant reform under the Electricity Act is the move toward a multi-

buyer, multi-seller system, as opposed to the previous structure which permitted only a single buyer to purchase power

from generators. Furthermore, under the Electricity Act, the regulatory regime is more flexible, has a multi-year

approach and allows the Central and State regulatory commissions greater freedom in determining tariffs, without being

constrained by rate-of-return regulations.

National Electricity Policy, 2005

The National Electricity Policy was notified in February 2005. This policy aims at accelerated development of the

power sector, focusing on the supply of electricity to all areas and protecting interests of consumers and other

stakeholders, keeping in view availability of energy resources technology available to exploit these resources,

economics of generation using different resources and energy security issues.

National Tariff Policy, 2006

The National Tariff Policy ("NTP") was notified by the GoI on January 6, 2006. Its main objectives are to:

• ensure availability of electricity to consumers at reasonable and competitive rates;

• ensure financial viability of the sector and attract investments;

• promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimize

perceptions of regulatory risks; and

• promote competition, efficiency in operations and improvement in quality of supply.

The NTP stipulates that all future power requirements should be procured competitively by distribution licensees except

in cases of expansion of pre-existing projects or where there is a public sector controlled or owned developer involved.

In these cases, regulators must resort to tariffs set by reference to standards of the Central Electricity Regulatory

Page 57: Shelf Prospectus

55

Commission ("CERC"), provided that expansion of generating capacity by private developers for this purpose will be

restricted to a one time addition of not more than 50% of the existing capacity. Under the NTP, even for public sector

projects, tariffs for all new generation and transmission projects will be decided on the basis of competitive bidding

after a certain time period.

Rural Electrification Initiatives

The MoP introduced the Rajiv Gandhi Grameen Vidhyutikaran Yojana ("RGGVY") in April 2005, for achieving the

aim of providing access to electricity to all rural households over a period of four years (Source: website for the MoP).

Rural Electrification Corporation Limited has been appointed the nodal agency for the RGGVY, and the scheme is 90%

funded by Central subsidy and 10% by the States, through their own resources or by seeking financial assistance from

financial institutions. The States were responsible for finalizing their own rural electrification plans, which were to be a

roadmap for generation, transmission, sub-transmission and distribution of electricity within that State to ensure

achievement of the scheme objectives. (Source: MoP Office Memorandum No 44/19/2004 D(RE), dated March 18,

2005).

Ultra Mega Power Projects ("UMPPs")

For meeting the growing needs of the economy, generation capacity in India must rise significantly and sustainably over

the coming decades. There is therefore a need to develop large capacity projects at the national level to meet the

requirements of different States. Development of UMPPs is one step the MoP is taking to meet this objective. Each

project is a minimum of 4,000 MW and involves an estimated investment of approximately U.S.$ 4.00 billion. The

projects are expected to substantially reduce power shortages in India. The UMPPs will be awarded to developers on a

build-own-operate basis and are expected to be built at 16 different locations. (Source: website of the MoP) For details,

see section titled "Our Business" and "Regulations and Policies" on pages 59 and 80, respectively.

Independent Transmission Projects

The MoP has initiated a tariff based competitive bidding process for independent transmission projects ("ITPs"), which

is a process similar to that followed for UMPPs, for the development of transmission systems through private sector

participation. The ITPs aim to evacuate power from generating stations and transmit the power from pooling stations to

other grid stations, resulting in system strengthening across India. (Source: website of the MoP) For details, see section

titled "Our Business" and "Regulations and Policies" on pages 59 and 80, respectively.

Hydro Power Policy 2008

The Hydro Power Policy, 2008, emphasizes increasing private investment in the development of hydroelectric projects.

The policy aims at attracting private funds by encouraging joint ventures with private developers and the use of the IPP

model, in addition to promoting power trading and speeding up the availability of statutory clearances. The policy

provides guidelines for accelerated development of the hydropower industry in India, particularly in the Himalayan

States. (Source: Hydropower Policy 2008, MoP)

National Solar Mission

The MNRE has approved a new policy on development of solar energy in India by the Jawaharlal Nehru National Solar

Mission. The mission recommends the implementation of an installed capacity of 20,000 MW in three stages by the end

of the 13th

Five Year Plan (2017-2022). It proposes to establish a single window investor-friendly mechanism, which

reduces risk and at the same time, provides an attractive, predictable and sufficiently adequate tariff for the purchase of

solar power from the grid. The key driver for promoting solar power would be through a renewable purchase obligation

mandated for power utilities, with a specific solar component. (Source: www.mnre.gov.in, website of the MNRE)

Restructured Accelerated Power Development and Reform Program ("R-APDRP")

The MoP launched the R-APDRP in July 2008 to extend and restructure the Accelerated Power Development and

Reform Program ("APDRP") beyond the 10th

Plan and ensure the achievement of better results. R-APDRP was

designed to run during the 11th Plan, with projects under the program taken up in two parts. Part-A projects include

those for establishment of a reliable system for the collection of accurate base line data and IT application, for energy

auditing. Part-B projects include regular distribution strengthening projects, to improve the sub-transmission and

distribution system. (Source: www.powermin.nic.in, Website of the MoP; Office Memorandum dated December 22,

2008)

Distribution Reform, Upgrades and Management ("DRUM")

Page 58: Shelf Prospectus

56

The MoP, acting in conjunction with the United States Agency for International Development, have established the

DRUM project in 2004 with the purpose of demonstrating best commercial and technological practices that improve the

quality and reliability of "last mile" power distribution in selected urban and rural distribution circles in India. The

project's objectives include improved power distribution, better availability and quality of electricity, enhanced

commercial orientation and drive and the facilitation of the distribution reform process. (Source: www.powermin.nic.in,

website of the MoP; Background Note on DRUM)

Delivery through Decentralized Management ("DDM")

DDM is an MoP sponsored scheme, launched in March 2005, with the objective of showcasing participatory models of

excellence in distribution in rural areas. It aims to promote public participation, encourage community management and

attract private investment in distribution by establishing distribution franchises and distributed generation projects.

STRUCTURE OF INDIA'S FINANCIAL SERVICES INDUSTRY

The RBI is the central regulatory and supervisory authority for the Indian financial system. The Board for Financial

Supervision, constituted in November 1994, is the principal body responsible for the enforcement of the RBI's statutory

regulatory and supervisory functions. SEBI and the Insurance Regulatory Development Authority regulate the capital

markets and the insurance sectors, respectively.

A variety of financial institutions and intermediaries, in both the public and private sector, participate in India's

financial services industry. These are:

• commercial banks;

• NBFCs;

• specialized financial institutions, such as the National Bank for Agriculture and Rural Development, the Export-

Import Bank of India, the Small Industries development Bank of India and the Tourism Finance Corporation of India;

• securities brokers;

• investment banks;

• insurance companies;

• mutual funds; and

• venture capital funds.

Debt Market in India

(Source: Economic Survey 2009-2010; Ministry of Finance, Government of India; text available at –9-

10/chapt2010/chapter05.pdf)

(Source: http://indiabudget.nic.in/es2009-10/chapt2010/chapter05.pdf)

The Indian debt market has two segments, namely, the Government securities market and corporate debt market.

Government securities market:

The fresh issuance of GoI dated securities in 2009 amounted to ` 4,89,000 crores as against ` 2,04,317 crores in 2008.

The outstanding dated securities of the GoI increased from ` 14,16,443 crores at the end of December 2008 to ` 18,26,774 crores at the end of December 2009. Yields on securities showed relatively lower intra-year variations in

2009 as compared with the previous year. The cut-off yield-to-maturity range on fresh issuances during the year

narrowed from 6.24-10.03% in 2008 to 4.86-8.43% in 2009.

The volume of secondary market transactions (outright) in Government securities has improved, with the turnover ratio

(volume of transactions as a ratio of end-period stock) increasing to 1.7 in the calendar year 2009, compared to 1.5 in

calendar year 2008.

In the secondary market, yields on dated government securities hardened during the year, particularly after July 2009,

reflecting the impact of the announcement of a relatively large government borrowing programme for Fiscal 2010.

Yields on dated securities of five and 10 year maturities increased to 7.30% and 7.59% respectively in the end of

December 2009 and from 5.41% and 5.25% respectively, in end-December 2008.

Corporate debt market:

Page 59: Shelf Prospectus

57

Pursuant to the guidelines of the High Level Expert Committee on Corporate Bonds and Securitisation (December

2005) and the subsequent announcement made in the Union Budget 2006-07, SEBI authorised BSE (January 2007),

NSE (March 2007) and the Fixed Income Money Market and Derivatives Association of India (FIMMDA) (August

2007) to set up and maintain corporate bond reporting platforms for information related to trading in corporate bonds.

BSE and NSE put in place corporate bonds trading platforms in July 2007 to enable efficient price discovery in the

market. This was followed by operationalization of a DvP-I(trade-by-trade)- based clearing and settlement system for

over-the-counter trades in corporate bonds by the clearing houses of the exchanges. In view of these market

developments, the RBI announced in its Second Quarter Review of the Annual Policy Statement for 2009-10 in October

2009 that the repo in corporate bonds could now be introduced. The RBI issued the Repo in Corporate Debt Securities

(Reserve Bank of India) Directions, 2010, on January 8, 2010.

Total traded volume in corporate bonds during April-December 2009 was ` 2,42,686 crores, higher by 173.4% over the

traded volume of ` 88,750 crores during April-December 2008. During Fiscal 2010 up to December 2009, the yield on

corporate debt paper with AAA rating for five-year maturity moved in the range of 7.71-8.94%. The spread between

yield on five-year GoI bonds and corporate debt paper with AAA rating with five-year maturity, which was around 330

basis points in the beginning of 2009, narrowed to 150 basis points by the end of June 2009 and further to around 110

points by the end of December 2009.

NBFC-Infrastructure Finance Companies ("IFCs")

In February 2010, the RBI introduced IFCs as a new category of infrastructure funding entities. Non-deposit taking

NBFCs which satisfy the following conditions are eligible to apply to the RBI to seek IFC status:

• minimum of 75% of its assets deployed in infrastructure loans;

• net owned funds of at least ` 3,000.00 million;

• minimum credit rating "A" or equivalent rating by accrediting agencies; and

• capital to risk (weighted) assets ratio of 15% (with a minimum Tier 1 capital of 10%).

IFCs enjoy benefits which include a lower risk weight on their bank borrowings (from a flat 100% to 20% for AAA-

rated borrowers), higher permissible bank borrowing (up to 20% of the bank’s net worth compared to 15% for an NBFC

that is not an IFC), access to external commercial borrowings (up to 50% of owned funds under the automatic route)

and relaxation in their single party and group exposure norms. These benefits would enable a highly rated IFC to raise

more funds, of longer tenor and at lower cost, and in turn to lend more to infrastructure companies.

For more information, see section titled "Regulations and Policies" on page 80.

PROVIDERS OF FINANCE TO THE POWER SECTOR IN INDIA

The primary providers of power sector financing in India are power sector specific government companies, financing

institutions, public sector banks and other public sector institutions, international development institutions and private

banks.

Power Sector Specific Government Companies

Our Company was incorporated in July 1986, with the main objective of financing power projects, transmission and

distribution works and the renovation and modernization of power plants.

Besides our Company, the other public sector companies and agencies engaged in financing the power sector are as

follows. For details on our Company, see section titled "Our Business" on page 59.

Rural Electrification Corporation

The Rural Electrification Corporation Limited ("REC") is a government company, which is registered as an NBFC and

has been notified as an IFC. It was established in 1969, under the administrative control of the MoP. Its main objective

is to finance and promote rural electrification projects throughout India. It provides financial assistance to SEBs, State

government departments and rural electric cooperatives for rural electrification projects. REC also promotes and

finances rural electricity cooperatives, administers funds and grants from the GoI and other sources for financing rural

electrification, provides consultancy services and project implementation in related fields, finances and executes small,

mini and micro generation projects as well as larger generation, transmission and distribution power projects, and

develops other energy sources. REC’s equity shares are listed on the Stock Exchanges.

Page 60: Shelf Prospectus

58

Indian Renewable Energy Development Agency

The Indian Renewable Energy Development Agency ("IREDA") is a wholly-owned government company, which is

registered as an NBFC and has been notified as an IFC. It was established in 1987, under the administrative control of

the Ministry of Non-Conventional Energy Sources, GoI, with the objective of promoting, developing and extending

financial assistance for renewable energy and energy efficiency, and energy conservation projects.

Private Financial Institutions

Financial institutions were established to provide medium-term and long-term financial assistance to various industries

for setting up new projects and for the expansion and modernization of existing facilities. These institutions provide

fund based and non-fund based assistance to industry in the form of loans, underwriting, direct subscription to shares,

debentures and guarantees, and therefore compete in the Indian power finance sector. The primary long-term lending

institutions include Infrastructure Development Finance Company Limited, India Infrastructure Finance Company

Limited, IFCI Limited, PTC India Financial Services Limited, Industrial Investment Bank of India Limited and Small

Industries Development Bank of India.

State Level Financial Institutions

State financial corporations operate at the State level and form an integral part of the institutional financing system.

State financial corporations were set up to finance and promote small and medium-sized enterprises. At the State level,

there are also State industrial development corporations, which provide finance primarily to medium-sized and large-

sized enterprises. Examples include Delhi Financial Corporation, Delhi State Industrial Development Corporation

Limited, Economic Development Corporation of Goa, Daman and Diu Limited, Goa Industrial Development

Corporation, Western Maharashtra Development Corporation Limited, Madhya Pradesh State Industrial Development

Corporation Limited and Orissa Industrial Infrastructure Development Corporation. (Source: website for the Council of

State Industrial Development and Investment Corporations of India)

Public Sector Banks and other Public Sector Institutions

Public sector banks are believed to make up the largest category of banks in the Indian banking system. The primary

public sector banks operating in the power sector include the Industrial Development Bank of India, State Bank of

India, Punjab National Bank and the Bank of Baroda. Other public sector entities also provide financing to the power

sector. These include organizations such as the Life Insurance Corporation of India and India Infrastructure Finance

Company Limited.

International Development Financial Institutions

International development financial institutions are supportive of power sector reform and of more general economic

reforms aimed at mobilizing investment and increasing energy efficiency. The primary international development

financial institutions involved in power sector lending in India include several international banking institutions such as

Japan Bank for International Cooperation, KfW, the World Bank, the Asian Development Bank ("ADB") and the

International Finance Corporation.

In the early 1990s, the World Bank decided to finance mainly projects in states that "demonstrate a commitment to

implement a comprehensive reform of their power sector, privatize distribution, and facilitate private participation in

generation and environment reforms". Recent loans from the World Bank have gone to support the restructuring of

SEBs. In general, the loans are for rehabilitation and capacity increase of the transmission and distribution systems, and

for improvements in metering the power systems in Indian States that have agreed to reform their power sector.

The overall strategy of the ADB for the power sector is to support restructuring, especially the promotion of

competition and private sector participation. Like the World Bank, the ADB also provides loans for restructuring the

power sector in the States and improving transmission and distribution.

Page 61: Shelf Prospectus

59

OUR BUSINESS

Unless otherwise stated, financial information included in this section for fiscal 2007, 2008, 2009, 2010 and 2011 have

been derived from our standalone financial statements for fiscal 2007, 2008, 2009, 2010 and 2011. For further

information, see section titled “Certain Conventions, Use of Financial, Industry and Market Data and Currency of

Presentation” on page 6.

In this section, unless the context otherwise requires, a reference to the "Company" is a reference to Power Finance

Corporation Limited and unless the context otherwise requires, a reference to "we", "us" and "our" refers to Power

Finance Corporation Limited and its Subsidiaries, joint ventures and associate company, as applicable in the relevant

fiscal period, on a consolidated basis.

Background

We are a leading financial institution in India focused on the power sector. We were established as an integral part of,

and continue to play a strategic role in, the GoI’s initiatives for the development of the power sector in India. We work

closely with GoI instrumentalities, State governments and power sector utilities, other power sector intermediaries and

private sector clients for the development and implementation of policies and structural and procedural reforms for the

power sector in India. In addition, we are involved in various GoI programs for the power sector, including acting as the

nodal agency for the UMPP program and the R-APDRP and as a bid process coordinator for the ITP scheme.

We provide a comprehensive range of financial products and related advisory and other services from project

conceptualization to the post-commissioning stage for our clients in the power sector, including for generation

(conventional and renewable), transmission and distribution projects as well as for related renovation and modernization

projects. We provide various fund based financial assistance, including project finance, short-term loans, buyer's line of

credit and debt refinancing schemes, as well as non-fund based assistance including default payment guarantees and

letters of comfort. We also provide various fee-based technical advisory and consultancy services for power sector

projects.

We have well established relationships with the GoI and State governments, regulatory authorities, major power sector

organizations, Central and State power utilities, as well as private sector power project developers. We have also

strategically expanded our focus areas to include projects that represent forward and backward linkages to the core

power sector projects, including procurement of capital equipment for the power sector, fuel sources for power

generation projects and related infrastructure development. We also intend to fund power trading initiatives.

Our primary sources of funds include equity capital, internal resources and domestic and foreign borrowings. We

currently enjoy the highest credit ratings of "AAA/Stable" and "AAA" for our long-term domestic borrowings and

"P1+" and "A1+" for our short-term borrowings from CRISIL (a subsidiary of Standard & Poor's) and ICRA (an

affiliate of Moody's), respectively. International credit rating agencies Moody's, Fitch and Standard & Poor's have

granted us long-term foreign currency issuer ratings of "Baa3", "BBB-" and "BBB-", respectively, which are at par with

the sovereign ratings for India.

We are a listed government company and a public financial institution under the Companies Act. We are registered with

the RBI as a non-deposit taking systemically important NBFC ("NBFC") and were classified as an IFC in July 2010.

We believe that our NBFC and IFC classification enables us to effectively capitalize on available financing

opportunities in the power sector in India. In addition, as a government-owned NBFC, loans made by us to Central and

State entities in the power sector are currently exempt from the RBI's prudential lending (exposure) norms that are

applicable to other non-government owned NBFCs. However, we follow prudential lending norms and guidelines

approved by the MoP with respect to loans made to Central and State entities in the Indian power sector, while our

loans made to the private sector are generally consistent with lending (exposure) norms stipulated by the RBI. We

believe our classification as an IFC enhances our ability to raise funds on a cost-competitive basis (including through

issuance of Rupee-denominated infrastructure bonds that offer certain tax benefits to the bondholders), and increase our

lending exposures to individual entities, corporations and groups, compared to other NBFCs that are not IFCs.

We were granted the Navratna status by the DPE in 2007, and have received an "Excellent" rating from the GoI in each

of the last five fiscal years. We were also awarded the India Pride Award 2009 in the NBFC category for excellence

among public sector undertakings, and the Dalal Street Investor Journal PSU Award 2010 for being the Heavy Weight

Navratna PSU and the Fastest Growing Navratna PSU, in the non-manufacturing category. In April 2011, we have also

received Gentle Giant, the Largest Navratna (Non-Manufacturing) award at the 3rd DSIJ PSU Awards and SCOPE

Commendation Certificate in the category of “Best Managed Bank, Financial Institution or Insurance Company” for the

year 2009

Page 62: Shelf Prospectus

60

We have an established track record of consistent financial performance and growth:

• Our total loan assets increased from ` 43, 903 crore as of March 31, 2007 to 99,571crore as of March 31, 2011,

at a CAGR of 23%.As of March 31, 2011, our total loans sanctioned pending disbursement (net of any loan

sanctions cancelled) was ` 1,54,759 crore.

• Our total income increased from ` 3,928 crore in fiscal 2007 to ` 10,161 crore in fiscal 2011, at a CAGR of

27%, while our profit after tax increased from ` 986 crore in fiscal 2007 to ` 2620 crore in fiscal 2011, at a

CAGR of 28%.

• We had gross NPAs of ` 13.16 crore, ` 13.16 crore, ` 13.16 crore and ` 230.65 crore as of March 31, 2008,

2009 and 2010 and 2011, respectively, which represented 0.03%, 0.02%, 0.02% and 0.23% of our total loan

assets, respectively, as of such dates.

• Our profit after tax as a percentage of average total assets and as a percentage of average net worth were 2.79%

and 19.68%, respectively, in Fiscal 2011.

• Our net worth as of March 31, 2011 was ` 14,198 crore.

• Our capital adequacy ratio was 18.2% and 15.7% as of March 31, 2010 and as of March 31, 2011, respectively.

Recent Developments

Further Public Offer

In May 2011 our company came up with a further public offer (FPO) comprising of Fresh Issue of 172,165,005 Equity

Shares of `10 each and offer for sale of 57,388,335 Equity Shares of ` 10 each at a price of ` 203 per equity share

aggregating to ` 45,782.05 million. After the FPO, the shareholding of the President of India, through the MoP, was

reduced to 73.72% of the fully diluted present paid-up equity capital of our Company. Discount of 5% to the Issue Price

was offered to Eligible Employees and to Retail Bidders.

Incorporation of wholly owned subsidiary

Our Company has incorporated a wholly owned subsidiary on July 18, 2011 by the name of PFC Capital Advisory

Services Limited. For further details refer to “History and Certain Corporate Matters” on page 91.

Our Strengths

We believe that the following are our primary strengths:

Comprehensive financial assistance platform focused on the Indian power sector

We provide a comprehensive range of financial products and related advisory and other services from project

conceptualization to the post-commissioning stage, to our clients in the power sector, including for generation

(conventional and renewable), transmission and distribution projects as well as for related renovation and modernization

projects. We provide various fund-based financial products including long-term project finance, short-term loans,

buyer's line of credit and debt refinancing schemes, as well as non-fund based assistance including default payment

guarantees and letters of comfort. We also provide various fee-based technical advisory and consultancy services for

power sector projects.

Strategic role in GoI initiatives and established relationships with power sector participants

We were established as an integral part of, and have played a strategic role in, the GoI’s initiatives for the promotion

and development of the power sector in India for more than two decades. We have been involved in the development

and implementation of various policies and structural and procedural reforms for the power sector in India. We are also

involved in various GoI programs for the power sector, including acting as the nodal agency for the UMPP and the R-

APDRP and as a bid process coordinator for the ITP scheme.

As a result, we have developed strong relationships with the Central and State governments, various regulatory

authorities, significant power sector organizations, Central and State power utilities, private sector project developers,

as well as other intermediaries in the power sector. We believe that our wide experience in implementing government

policies and programs provide us with industry expertise that enables us to leverage our project risk assessment

capabilities to effectively evaluate projects, structure appropriate financing solutions, develop effective loan

disbursement and project monitoring methodologies, as well as provide regulatory and related advisory services. We

believe we provide value to our clients in various ways, by supporting their operations as well as providing assistance

Page 63: Shelf Prospectus

61

with long-term reform and restructuring programs. We believe that this unique positioning enables us to leverage our

power sector expertise, our existing large client base and continuing relationships with government agencies and

instrumentalities to be a preferred financing provider for the power sector in India.

Operational flexibility to capitalize on both fundraising and lending opportunities

We are registered with the RBI as an NBFC and have also been classified as an IFC. We believe that our NBFC and

IFC classification enables us to be operationally more flexible than some of our competitors and effectively capitalize

on available financing opportunities.

As an NBFC, we are governed by regulations and policies that are generally less stringent than those applicable to

commercial banks, including with respect to liquidity requirements and the requirement to hold a significant portion of

funds in relatively low yield assets, such as government and other approved securities and cash reserves.

In addition, as a government-owned NBFC, loans made by us to Central and State entities in the power sector have been

exempted from RBI's prudential lending (exposure) norms applicable to other non-government owned non-deposit

taking systemically important NBFCs. Such exemptions, unless further extended by the RBI, are currently applicable

until March 31, 2012. In compliance with RBI's directive in this regard, we are in the process of formulating and

submitting a roadmap (in consultation with the MoP) to the RBI prior to March 31, 2012, that sets out the manner in

which we intend to comply with (including further capitalization) such prudential regulations of RBI. We follow

prudential lending norms and guidelines approved by the MoP with respect to loans made to Central and State entities

in the Indian power sector, while our loans made to the private sector are generally consistent with lending (exposure)

norms stipulated by the RBI.

In July 2010, we were classified as an IFC, which is a distinct category of NBFCs that are primarily engaged in

infrastructure financing. We believe our classification as an IFC enables us to increase our lending exposures to

individual entities, corporations and groups, compared to other NBFCs that are not IFCs. We believe that these are

significant competitive advantages in providing project financing for large, long-gestation power sector projects. For

example, an IFC is entitled to lend up to 25.0% of its Owned Funds to a single borrower in the infrastructure sector,

compared to 20.0% of Owned Funds by other NBFCs categorized as a Loan Company. As an IFC, we are also eligible

to raise, under the automatic route (without the prior approval of the RBI), ECBs up to US$500.00 million each fiscal

year, subject to the aggregate outstanding ECBs not exceeding 50.0% of our Owned Funds. As an IFC, we are also

required to maintain CRAR of 15.0% (with a minimum Tier I capital of 10.0%). For further information relating to the

IFC category of NBFCs and differences with non-IFC classified NBFCs, see section titled "Regulations and Policies"

on page 80.

Favourable credit rating and access to various cost-competitive sources of funds

Our primary sources of funds include equity capital, internal resources and domestic and foreign borrowings. CRISIL

and ICRA have granted us the highest credit ratings of "AAA/Stable" and "AAA", respectively, for our long-term

domestic borrowings and "P1+" and "A1+", respectively, for our short-term borrowings. International credit rating

agencies Moody's, Fitch and Standard & Poor's have provided us long-term foreign currency issuer ratings of "Baa3",

"BBB-" and "BBB-", respectively, which are at par with the sovereign ratings for India.

We believe that our financial strength and our favourable credit ratings enable us to access various cost competitive

funding options. Our borrowings reflect various sources, maturities and currencies, and include bonds and term loans,

as well as commercial paper. Our primary sources of funds are Rupee-denominated bonds and commercial borrowings

raised in India. In addition, as an IFC, we are able to further diversify our borrowings through the issuance of Rupee-

denominated infrastructure bonds that offer certain tax benefits to bondholders. Further, subject to certain restrictions

we are also eligible to raise, under the automatic route (without the prior approval of the RBI), ECBs up to US$500.00

million each fiscal year. We have also accessed various international funding sources including the World Bank, the

Asian Development Bank and Kfw. Our cost of funds in fiscal 2008, 2009, 2010 and 2011 was 8.0%, 8.7%, 8.1% and

8.2%, respectively, which we believe is competitive. In addition, historically most of our borrowings have been on an

unsecured basis.

Comprehensive credit appraisal and risk management policies and procedures

We have developed extensive knowledge and experience in the Indian power sector, and believe we have

comprehensive credit appraisal policies and procedures, which enable us to effectively appraise and extend financial

assistance to various power sector projects. We follow a systematic institutional and project appraisal process to assess

Page 64: Shelf Prospectus

62

and mitigate project and credit risk. We believe our internal processes and credit review mechanisms reduce the number

of defaults on our loans and contribute to our profitability.

We believe that our comprehensive credit appraisal and project monitoring process have resulted in strong collection

and recovery. We had gross NPAs of ` 13.16 crore, ` 13.16 crore, ` 13.16 crore and ` 230.65 crore as of March 31,

2008, 2009, 2010 and 2011, respectively, which represented 0.03%, 0.02%, 0.02% and 0.23% of our total loan assets,

respectively, as of such dates.

Track record of consistent financial performance and growth

We believe that we have an established track record of consistent financial performance and growth, which enable us to

capitalize on attractive financing opportunities in the power sector in India. Our total loan assets increased from `

43,903 crore as of March 31, 2007 to ` 99,571 crore as of March 31, 2011, at a CAGR of 23%. As of March 31, 2011,

our total loans sanctioned pending disbursement (net of any loan sanctions cancelled) was ` 154,759 crore. In addition,

our loan asset portfolio has increasingly become diversified by sector and customer base.

Experienced and committed management and employee base with in-depth sector expertise

We believe we have an experienced, qualified and committed management and employee base. Many of our employees,

particularly senior management, have worked with our Company for significantly long periods. We believe we have an

efficient and lean organizational structure relative to the size of our operations and profitability. Our personnel policies

are aimed towards recruiting talented employees and facilitating their integration into the Company and encouraging the

development of their skills.

Our management has significant experience in the power sector and the financial services industry, which has enabled

us to develop a comprehensive and effective project appraisal process, implement a stringent risk management

framework, identify specific requirements of power sector projects and offer comprehensive financing solutions and

advisory assistance to such projects. The experience of our management together with their strong relationships with

government agencies and instrumentalities and other power sector intermediaries have enabled us to successfully

identify attractive financing opportunities. We believe that our experienced management team has been key to our

success and will enable us to capitalize on future growth opportunities.

Business Strategies

Continue to leverage our industry expertise and relationships to capitalize on the expected growth in the Indian

power sector

We intend to continue to leverage our industry experience and relationships to provide comprehensive financing

solutions for power sector projects in India. The Indian power sector has historically been characterized by power

shortages and relatively low per capita consumption. According to Mid Term Appraisal Report of the Planning

Commission, the projected capacity addition at the end of the 11th Plan is expected to be 62,374 MW. Similarly, a

tentative capacity addition of approximately 100,000 MW has been envisaged for the 12th Plan. (Source: International

Conclave, August, 2009). The 11th Plan estimated fund requirements in excess of ` 10,316.00 billion for investment in

power generation, transmission and distribution projects (Source: White Paper) while fund requirements for the 12th

Plan are estimated in excess of ` 11,000.00 billion (Source: International Conclave August, 2009). We intend to

continue to leverage our industry expertise and ability to develop, supervise and implement structured financial

assistance packages based on specific operational and financial performance standards to assist otherwise financially

weak State Power Utilities ("SPUs") and public sector projects to improve their financial position. We intend to

continue to contribute to the development and implementation of GoI policies relating to the power sector in India and

play an integral role in the supervision of the implementation of reforms by SPUs and government agencies.

Strategically expand our business and service offerings

Consultancy and other fee-based services

We intend to continue to increase our focus on our fee-based technical and consultancy services to SPUs, power

distribution licensees, IPPs, public sector undertakings and SERCs. We also intend to continue providing fee-based

services for various GoI programs for the power sector in India, including acting as a nodal agency for UMPP and R-

APDRP projects and as a bid process coordinator for the ITP scheme.

Page 65: Shelf Prospectus

63

We believe that institutional and regulatory reforms in the Indian power sector and increased investor interest will lead

to consolidation in the power sector. We intend to focus on acquisition advisory services for power sector projects,

including the identification of target projects and potential acquirers for acquisitions and consolidation opportunities,

and also provide techno-commercial appraisal of target projects.

Debt syndication

We intend to increase our focus on debt syndication activities in the power sector. We have acted as the lead financial

institution for several projects, and have carried out syndication activities for various projects including with members

of the Power Lenders Club, a group of 21 banks and financial institutions that work together to provide financing for

large projects in the Indian power sector. We intend to continue to target debt syndication opportunities as we believe

that our technical expertise and industry experience, our project appraisal capabilities and our relationship with

commercial banks and other financial institutions enable us to ensure timely financial closure for such projects.

Equity investments

As part of our growth strategy, and subject to receipt of relevant approvals, we are in the process of evaluating potential

equity investment opportunities in power sector projects. We aim to leverage our power sector experience and

relationships, existing client base, our financial strength and lending capability to invest in power sector projects. In

addition, we may consider equity syndication opportunities for power sector projects, which we expect will also

increase our fee-based income.

Other initiatives

We are currently in the preliminary stages of evaluating the possibility of establishing or acquiring a bank and are in the

process of appointing a consultant in connection with such initiative.

Broaden our loan asset base and borrower profile

Private sector projects

As of March 31, 2008, 2009, 2010 and 2011, 7.5%, 6.8%, 5.2% and 6.8% of our total loan assets related to private

sector projects. We intend to continue to provide financial assistance to private sector generation, transmission and

distribution projects to further diversify our borrower profile.

Hydro projects and renewable energy

We intend to continue to focus on providing financial assistance to hydro projects to facilitate an optimal mix of thermal

and hydro projects in our loan asset portfolio. We have extended loan repayment periods of up to 20 years after

moratorium for hydro projects, effectively increasing the loan tenor for such projects.

We believe that the renewable energy space in India provides significant untapped potential. According to the MNRE,

as of March 31, 2011, India had an aggregate installed capacity of 18,842 MW of renewable energy projects out of an

estimated potential of 87,230 MW (Source: Ministry of New and Renewable Energy, Report, March 2011). The GoI has

also launched the Jawaharlal Nehru National Solar Mission ("JNNSM"), with a target of 20,000 MW grid connected

solar power by fiscal 2022. We have strategically increased our focus on renewable energy projects, including solar,

wind, biomass and small hydro projects, to capitalize on the GoI’s various renewable energy initiatives. These

initiatives include requiring State distribution utilities’ to meet certain minimum specified percentage of total power

requirements from renewable energy sources and special tariffs for renewable energy projects.

We intend to continue to provide financing for public and private sector renewable energy generation projects. Until

March 31, 2011, our total loan assets outstanding with regard to renewable energy projects aggregated ` 1,195.43 crore.

As of March 31, 2011, 1.2% of our total loan assets and 0.93% of our total loans sanctioned pending disbursement

related to renewable energy projects. In addition, we have been nominated to act as a nodal agency to assist State power

utilities in anticipation of the introduction of CDM projects for the renovation and modernization of old thermal and

hydro projects.

Forward and backward linkages to core power sector projects

As of March 31, 2011, 74.4%, 7.6% and 4.7% of our loan assets related to power generation (excluding corporate loans

and loans given for renovation and modernization to power generation companies) projects, transmission projects and

Page 66: Shelf Prospectus

64

distribution projects, respectively. We have strategically expanded our focus areas to include projects that represent

forward and backward linkages to the core power sector projects, including capital equipment for the power sector, fuel

sources for power generation projects and related infrastructure development, as well as power trading initiatives.

Capital equipment manufacturers.

The significant capacity addition in the Indian power sector requires augmentation of equipment manufacturing

capacities for capital equipment for all segments of the power sector: generation, transmission and distribution. We

intend to provide financial assistance for manufacturers of equipment used in the power sector, including transmission

and distribution equipment and solar and wind energy generation equipment.

Fuel sources and related infrastructure development.

The GoI has introduced various reforms for the development of fuel sources for thermal power generation projects,

including allocation of coal blocks to public and private sector entities as well as the development of related

infrastructure facilities for the transportation of coal and other fuel sources such as natural gas. We intend to provide

financing assistance to fuel supply projects and related infrastructure development projects.

Power trading

We intend to continue to strategically focus on power trading initiatives in India. In this connection we have made a

strategic investment in PEIL, which is promoted by the NSE and the NCDEX, and operates a national power exchange

in India. We have also entered into a joint venture agreement with NTPC, NHPC and TCS to establish NPEL, which

will operate a national level electronic power exchange. We intend to fund non-speculative purchases of power through

such exchanges by some of our borrowers, particularly public sector power distribution companies.

Continue to develop strategic partnerships and evaluate new business opportunities

We intend to continue to develop partnerships and alliances and evaluate new business opportunities related to the

power sector in India. We are equity shareholders in PTC, which is involved in power trading and related activities. We

have also invested in NPEL and PEIL to encourage power trading initiatives in India. While PEIL has been operating a

national level power trading platform since October 2008, NPEL is yet to commence operation. We have also invested

in the Small is Beautiful fund, which is a SEBI-registered venture capital fund that invests in power generation projects,

operated by KSK Investment Advisor Private Limited, a private sector power project developer. We have also promoted

PECAP with various industry experts to provide advisory services related to equity investments in the power sector in

India. We have also jointly promoted EESL with other government companies focused on the Indian power sector to

develop energy efficiency products and services and provide consultancy services related to CDM, carbon markets and

energy efficiency initiatives. In addition, in October 2010, we have entered into a memorandum of understanding with

NPCIL to explore potential financing opportunities for nuclear power generation projects.

Investment Considerations

Our ability to successfully implement our business plan and growth strategies continue to be subject to various factors,

including the following: concentration on the power sector which has a limited number of borrowers, which are mainly

SPUs and SEBs, many of which have been historically loss making; volatility in interest rates; an inability to obtain

sufficient security or collateral on our loans; our ability to maintain low effective cost of funds; our ability to implement

effective risk management policies and procedures; changes in applicable regulations and policies that adversely affect

our business and industry; various risks associated with the projects we finance and our ability to compete effectively.

For further discussion on weaknesses and threats, and of factors that could adversely affect our future financial

condition and results of operations, see section titled "Risk Factors" beginning on page 8.

Our Products

We provide a comprehensive range of fund based and non-fund based financial products and services from project

conceptualization to the post-commissioning stage to our clients in the power sector.

Our fund based financial assistance includes primarily project finance (both Rupee and foreign currency denominated

term loans), short-term and mini short-term loans. Our product portfolio also includes equipment lease financing,

buyer’s line of credit, debt refinancing schemes, bridge loans, transitional loans, loans for asset acquisition, bill

discounting and a line of credit for import of coal and other fuel.

Page 67: Shelf Prospectus

65

We also provide non-fund based assistance including default payment guarantees and letters of comfort.

FUND BASED

Our loan assets are presented as adjusted for any provisions for contingencies made in the respective fiscal periods.

The following table sets forth certain information relating to our total loan assets as of the dates indicated:

Particulars As of March 31,

2007 2008 2009 2010 2011

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of total

Rupee loans

(a) Term Loans 40,142.03 91.4 48,718.99 94.5 61,614.30 95.6 76,010.28 95.2 95,858.70 96.3

(b) Short-term loans 1,932.53 4.4 1,494.63 2.9 1,604.54 2.5 2,948.99 3.7 2,105.77 2.1

Foreign currency

loans

770.48 1.8 647.19 1.3 722.10 1.1 499.76 0.6 396.60 0.4

Others(1) 1,057.79 2.4 707.49 1.4 488.04 0.8 396.73 0.5 1,209.66 1.2

Total 43,902.83 100.0 51,568.31 100.0 64,428.99 100.0 79,855.76 100.0 99,570.74 100

(1) Others include equipment leasing, buyer’s line of credit, loans to equipment manufacturers, asset acquisition schemes and

debt refinancing schemes. Others also include medium-term Rupee loans.

The following table sets forth certain information relating to our total disbursements in the periods indicated:

Particulars Fiscal

2007 2008 2009 2010 2011

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of

total

`̀̀̀ crore % of total

Term loans(1)

11,481.00 81.70 13,420.10 82.80 18,057.20 85.80 22,553.60 87.40 29,010.70 85.00

Short-term loans 2,366.00 16.80 2,316.00 14.30 2,877.00 13.70 3,114.60(2) 12.10 4,206.00 12.30

Others(3)

208.00 1.50 475.00 2.90 120.10 0.50 140.30 0.50 904.60 2.70

Total 14,055.00 100.00 16,211.10 100.00 21,054.30 100.00 25,808.50 100.00 34,121.30 100.00

(1) Term loans include Rupee loans and foreign currency loans and disbursement under the R-APDRP and grants.

(2) Power exchange credit of ` 486.00 million in fiscal 2010 has been included under short-term loan.

(3) Others include equipment leasing, buyer’s line of credit, loans to equipment manufacturers, asset acquisition

schemes and debt refinancing schemes. Others also include medium-term Rupee loans.

Rupee Term Loans

Project finance rupee term loans accounted for 94.5% 95.6%, 95.2% and 96.3% of our total loan assets as of March 31,

2008, 2009, 2010 and 2011, respectively. We generally disburse funds either directly to a supplier of project equipment

or services or by way of reimbursement to the borrower against satisfactory proof of eligible expenditure on the relevant

project, or through the trust and retention account.

We generally implement security and quasi-security arrangements in relation to our Rupee terms loans. Our Rupee term

loan financings are generally secured in the case of public sector clients, including State utilities, either through a

charge on the project assets or by a State government guarantee, or both. In addition to such security or guarantee, most

of our loans to Central and State sector borrowers provide for an escrow mechanism. For private sector clients, our term

loan financings are secured through, among other things, through a first priority pari passu charge on the relevant

project assets, collaterals such as pledges of shares held by promoters and/or personal/corporate guarantees and trust

and retention arrangements. For further information, see section titled "Our Business- Security Risk" on page 75.

Interest rates on Rupee term loans are notified to the borrower from time to time. Specific interest rates may be offered

to certain borrowers based on the merit of the borrower and the relevant project. Typically, there is an option to select

interest rates with reset after every three years or ten years. We believe that our comprehensive credit appraisal and

project monitoring process, and our ability to manage the security and repayment profiles of our loan assets have

resulted in strong collection and recovery.

Page 68: Shelf Prospectus

66

We have raised ` 2,353.61 million through public issue of secured, redeemable, non convertible long term infrastructure

bonds, which were allotted on March 31, 2011. For further details, see section titled "Financial Indebtedness" on page

115.

Short-term Loans

We provide short-term loan finance to borrowers to meet their immediate fund requirements. Short-term loans

accounted for 2.9%, 2.5%, 3.7% and 2.1%, of our total loan assets as of March 31, 2008, 2009, 2010 and 2011,

respectively. These loans are Rupee-denominated and primarily relate to purchase of fuel for power plants; purchase of

consumables and essential spares; emergency procurement/works for generation plants and transmission and

distribution networks in the nature of repair and maintenance works; and purchase of power. We also extend short-term

loans against receivables from distribution companies to transmission companies on account of wheeling/transmission

charges.

Short-term loan facilities are typically extended for a period of up to one year. However, we have recently started

providing short-term loans to SPVs in the public sector to meet their working capital requirements.

Foreign Currency Loans

We sanction foreign currency loans based on the capital expenditure requirements of the relevant project, subject to

availability of foreign currency for lending. We provide foreign currency loans to power sector projects for end uses

that are permitted under applicable RBI regulations relating to ECBs. Foreign currency loans represented 1.3%, 1.1%,

0.6% and 0.4% of our total loan assets as of March 31, 2008, 2009, 2010 and 2011, respectively.

The interest rates offered for our foreign currency loans are fixed based on six months U.S. Dollar LIBOR or LIBOR in

other applicable foreign currency. The fixed rate margin over the relevant LIBOR is generally reset at the end of every

five years.

Our foreign currency loans are generally secured by, among other security, a first priority pari passu charge on the

relevant project assets, collaterals such as pledges of shares held by promoters, and/or personal/corporate guarantees.

Other Fund Based Financial Assistance

Our product portfolio includes providing a comprehensive range of other fund based financial assistance, including

equipment lease financing, buyers’ line of credit, loans to equipment manufacturers, asset acquisition schemes,

transitional loans and debt refinancing schemes. We also provide medium-term Rupee loans. These other fund based

financial assistance (including medium-term loans) represented, in the aggregate, 1.4%, 0.8%, 0.5% and 1.2% of our

total loan assets as of March 31, 2008, 2009, 2010 and 2011, respectively.

Equipment lease financing

We provide lease financing to fund the purchase of major capital equipment and machinery essential for power sector

projects and associated infrastructure projects. Equipment lease financing is extended to various core power sector

projects (including to power utilities), renewable energy projects, as well as associated infrastructure development

projects. Equipment lease financing may be provided up to the entire cost of the relevant equipment.

Buyers’ line of credit

We provide non-revolving Rupee line of credit for power sector projects in connection with purchase of machinery,

equipment and other capital goods (including accessories and spare parts) on a deferred payment basis.

Loans to equipment manufacturers

We provide short-term loans (up to one year) and medium-term loans (between one and five years) to manufacturers of

equipment or materials that have received firm contracts for power sector projects in India.

Asset acquisition schemes

We provide finance for the acquisition of assets by power sector projects.

Transitional loans

Page 69: Shelf Prospectus

67

Our product portfolio includes providing finance to state sector power projects, primarily to power generation and

transmission companies under restructuring process, to bridge the gap in cash flows during such phase.

Debt refinancing scheme

Under this scheme, we assist borrowers who have borrowed funds from other lending institutions at a higher rate of

interest to refinance their loans at a lower interest rate. The refinancing facility is available only for commissioned

projects.

Bill discounting scheme

We operate a bill discounting scheme which enables equipment manufacturers to sell their equipment, machinery,

turnkey projects and capital goods (including accessories and spares supplied along with the machinery to the extent

deemed reasonable) on deferred payment terms to power sector projects.

Corporate loans

We provide financing to existing players in the public and private sector, which enables experienced utilities to leverage

the successful operation of commissioned projects to mobilize funds for equity infusion in new projects.

Loans to grid connected solar PV power generation projects

We provide loans to grid connected solar PV power generation projects that have been approved by the MNRE.

Non Fund Based

We also provide non-fund based assistance including default payment guarantees and letters of comfort.

Default Payment Guarantees

We provide default payment guarantees on behalf of project companies to guarantee their payment obligations. Such

guarantees enable power sector projects to secure financing from other sources, including borrowings from commercial

banks, foreign lenders and debt capital markets. As of March 31, 2011, default payment guarantees issued by us

included € 0.04 crore and U.S.$ 1.43 crores in foreign currency guarantees and ` 400.00 crore Rupee denominated

guarantees.

Letters of Comfort

We provide comfort letters against our sanctioned term loans to enable borrowers to establish a letter of credit with their

bankers. The letter of comfort is issued only in cases where it is a pre-requisite for engineering, procurement and

construction ("EPC") contracts or equipment supply contracts of projects financed by us. The letter of comfort is issued

after all other pre-disbursement conditions have been complied with. As of March 31, 2011, we had outstanding letters

of comfort aggregating ` 5,758.02 crores.

Projects We Fund

Our project financing activities have been focused primarily on thermal and hydro generation projects, including

financing of renovation and modernization of existing thermal and hydro electric plants. Transmission and distribution

projects financed by us include system improvement and projects involving provision of shunt capacitors and meters.

We also focus on the promotion and development of other energy sources, including alternate and renewable fuels. As

of March 31, 2011, 74.4%, 7.6%, 4.7% and 3.3% of our loan assets related to power generation (excluding corporate

loans and loans given for renovation and modernization to power generation companies) projects, transmission projects,

distribution projects and renovation and modernization projects, respectively.

We have strategically expanded our focus areas to include projects that represent forward and backward linkages to the

core power sector projects, including procurement of capital equipment for the power sector, fuel sources for power

generation projects and related infrastructure development, as well as power trading initiatives.

The following table sets forth certain information relating to our loan assets as of the dates indicated, presented

according to the type of project:

Page 70: Shelf Prospectus

68

Particulars As of March 31,

2007 2008 2009 2010 2011

`̀̀̀ Crore % of

total

`̀̀̀ Crore % of

total

`̀̀̀ Crore % of

total

`̀̀̀ Crore % of

total

`̀̀̀ Crore % of

total

Generation

- Thermal 19,817.07 45.2 25,340.87 49.1 34,668.26 53.8 45,420.38 56.9 58,579.04 58.8

- Hydro 10,366.44 23.6 11,418.17 22.1 14,071.76 21.8 14,747.16 18.5 15,181.17 15.2

- Wind 232.96 0.5 211.67 0.4 191.60 0.3 300.52 0.4 325.97 0.3

- Solar - - - - - - 7 0.0(1) 32.87 0.0

(1)

Corporate term loan - - - - 500.00 0.8 3,500.00 4.4 6,500.00 6.5

Renovation and modernization (generation)

- Thermal

generation

2,263.31 5.2 2,393.76 4.6 2,563.48 4.0 2,660.31 3.3 2,869.89 2.9

- Hydro generation 336.79 0.8 367.46 0.7 343.20 0.5 370.25 0.5 413.39 0.4

Transmission 4,922.63 11.2 6027.64 11.7 6,470.62 10.0 6,228.92 7.8 7,570.46 7.6

R&M transmission 3.95 0.0(1) 20.59 0.0

(1)

23.467 0.0(1) 27.32 0.0

(1) 25.47 0.0(1)

Distribution

(Including shunt

capacitor and

metering)

2,504.76 5.7 3261.88 6.3 3,409.46 5.3 3,401.76 4.3 4,701.22 4.7

Short-term loans 1,932.51 4.4 1486.45 2.9 1,604.54 2.5 2,948.99 3.7 2,105.77 2.1

Equipment

manufacturing loan

6.76 0.0(1) 6.26 0.0

(1)

5.008 0.0(1) 3.76 0.0

(1) 829.50 0.8

Others(2)

1,505.21 3.4 1033.54 2.0 577.59 0.9 239.40 0.3 435.98 0.4

Total 43,892.39 100.0 51,568.31 100.0 64,428.99 100.0 79,855.76 100.0 99,570.73 100.0

(1) Negligible.

(2) Others include buyer’s line of credit, asset acquisition schemes, debt refinancing schemes, medium-term rupee

loans computerization, project settlement, pre-investment fund, technical assistance project, studies, long-term

working capital loan and interest accrued and due.

The following table sets forth certain information relating to loans disbursed in the periods indicated, presented

according to the type of the project:

Particulars Fiscal

2007 2008 2009 2010 2011

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

Generation

- Thermal 7,333.80 52.2 8,290.60 51.1 11,305.60 53.7 13,818.40 53.5 16,544.6 48.5

- Hydro 1,528.60 10.9 1,830.30 11.3 3,575.50 17.0 2,221.10 8.6 1,733.2 5.1

- Solar - - - - - - 7 0.0(1) 26.4 0.1

- Bagasse - - - - - - - - 0 0.00

Corporate term loan - - - - 500.00 2.4 3,000.00 11.6 3,000.00 8.8

Renovation and modernization (generation)

- Thermal generation 627.50 4.5 380.30 2.3 509.60 2.4 423.10 1.6 561.8 1.6

- Hydro generation 37.6 0.3 89.9 0.6 51.50 0.2 72.5 0.3 83.2 0.2

Transmission

(including R&M

transmission)

1,437.50 10.2 1,976.30 12.2 1296.00 6.2 1,056.00 4.1 2,615.4 7.7

Distribution (including

shunt capacitor and

metering)

657.80 4.7 1,160.90 7.2 610.40 2.9 625.60 2.4 1,825.3 5.3

RAPDRP Part-A - - - - 325.00 1.5 1,124.70 4.4 62.4 0.2

RAPDRP Part-B - - - - - - 196.40 0.8 2,039.8 6.0

RAPDRP Part-A

SCADA

- - - - - - - - 154.6 0.5

Short-term loans 2,366.00 16.8 2,316.00 14.3 2877.00 13.7 3,114.60 12.1 4,206 12.3

Equipment

manufacturing loan

- - - - - - - - 827 2.4

Page 71: Shelf Prospectus

69

Particulars Fiscal

2007 2008 2009 2010 2011

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

Others(2) 66.2 0.5 166.80 1.0 3.70 0.0(1) 149.10 0.6 441.6 1.3

Total 14,055.00 100.0 16,211.10 100.0 21,054.30 100.0 25,808.50 100.0 34,121.3 100.0

(1) Negligible.

(2) Other schemes such as computerization, project settlement studies, buyers’ line of credit, equipment lease financing, re-

bagasse and loans to manufacturers.

The following table sets forth certain information relating to our loan sanctions pending disbursement (net of any

sanctions cancelled) as of March 31, 2011 presented according to kind of projects:

Particulars As of March 31, 2011

((((`̀̀̀ Crores)

Thermal Generation 114,700

Hydro-electric Generation 10,292

Wind, Solar, Bagasse 995

Renovation and Modernizaation of Thermal Power Stations 3,003

Renovation & Uprating of Hydro Power Projects 347

Transmission 19,042

Distribution 4,760

Short Term Loan 475

Others* 1,145

Total** 154,759

* Others include Decentralized Management, Project Settlement, Pre Investment Fund, Technical Assistance Project,

Medium Term Loan, Buyers Line of Credit, Equipment Manufacturing Loan, Loan for Asset Acquisition, Bill

Discounting, Studies, Loan for Redemption of bonds, Purchase of power through PXI, Loan for Promoter’s Equity

and Computerization etc.

** Excluding APDRP

The following table sets forth information relating to our top ten borrowers (primarily generation companies) in terms

of loans outstanding as of March 31, 2011:

Borrower Loans outstanding

(`̀̀̀ Crores)

% of total outstanding

loans as of March 31,

2011

Borrower 1 8,510.60 8.55

Borrower 2 6,791.10 6.82

Borrower 3 6,564.21 6.59

Borrower 4 5,882.08 5.91

Borrower 5 5,598.77 5.62

Borrower 6 5,005.82 5.03

Borrower 7 4,672.65 4.69

Borrower 8 4,496.22 4.52

Borrower 9 4,007.93 4.02

Borrower 10 3,122.09 3.14

Total 54,651.47 54.89

Thermal generation projects. We provide finance for thermal energy generation projects in the public and private

sector. Thermal energy generation projects include coal and gas based power plants.

Hydro generation projects. We provide finance for hydro generation projects in the public and private sector. We

continue to focus on providing financial assistance to hydro projects to facilitate an optimal mix of thermal and hydro

projects in our loan asset portfolio. In this connection, we have extended loan repayment periods of up to 20 years after

moratorium for hydro projects, effectively increasing the loan tenor for such projects.

Renewable energy projects. We provide finance to various renewable energy projects, including solar, wind, biomass

and small hydro projects. We provide financing for public and private sector renewable energy generation projects.

Page 72: Shelf Prospectus

70

Renovation, modernization and life-extension scheme. We provide finance for renovation and modernization and life-

extension projects of old thermal and hydro power plants.

Transmission projects and schemes. We provide financing assistance to several kinds of power transmission projects,

including transmission and sub-transmission schemes, power evacuation lines and transmission links. Transmission

projects and schemes funded by us involve transmission of power within various States and from one region to another

region in India, assist in distribution of power within the State and also relate to transmission loss reduction schemes.

These schemes include construction of new transmission lines, reinforcement of existing transmission lines, new

substations, augmentation of transformer capacities of existing substations, replacement of old and obsolete equipment,

and bay extensions.

Distribution, capacitor and metering schemes. We have extended financial assistance to various projects and entities

that establish and upgrade sub-stations and distribution networks in various distribution circles, including for

installment of capacitors and meters to reduce losses and improve revenue generation, and to improve the quality and

reliability of power supply to consumers.

Sector-wise Loan Portfolio

We provide financial assistance to the public sector, which includes Central, State and joint (i.e., companies that have

both State and Central sector participation) sector; and to private sector projects.

The following table sets forth certain information relating to our total loan assets as of the dates indicated, presented

according to sector:

Particulars As of March 31,

2007 2008 2009 2010 2011

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

A. Public sector comprising of:

(i) State sector 33,542.83 76.439,114.18 75.8 46,438.94 72.154,137.59 67.864,507.42 64.79%

(ii) Central sector 5,385.70 12.3 6,666.78 12.9 9,283.09 14.415,015.21 18.820,300.10 20.39%

(iii) Joint sector 1,345.05 3.1 1,897.66 3.7 4,359.63 6.8 6,526.81 8.2 7,990.95 8.03%

B. Private sector 3,618.81 8.2 3,889.68 7.5 4,347.34 6.7 4,176.15 5.2 6,772.27 6.80%

Total 43,892.39 100.051,568.31 100.0 64,428.99 100.079,855.76 100.099,570.73 100.00%

The following table sets forth certain information relating to disbursements made in the periods indicated, presented

according to sector:

Particulars Fiscal

2007 2008 2009 2010 2011

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

`̀̀̀ Crores % of

total

A. Public sector comprising of:

(i) State sector 11,095.70 78.9 13,049.50 80.5 14,656.50 69.6 15,952.90 61.8 22,656.7 66.4

(ii) Central

sector

1,491.10 10.6 1,669.70 10.3 3,130.10 14.9 6,351.20 24.6 5,943.6 17.4

(iii) Joint sector 482.00 3.5 630.00 3.9 2,647.40 12.6 2,449.10 9.5 1,774.7 5.2

B. Private sector 986.20 7.0 861.90 5.3 620.30 2.9 1,055.30 4.1 3,746.3 11.0

Total 14,055.00 100.0 16,211.10 100.0 21,054.30 100.0 25,808.50 100.0 34,121.3 100.0

Institutional Development Role and Government Programs

The GoI and various State governments have undertaken various programs and initiatives for the reform and

restructuring of the power sector in India to ensure adequate supply of electricity at reasonable rates, to encourage

private sector participation and to make the Indian power sector self-sustaining and commercially viable. These

institutional and structural and procedural reforms are aimed at achieving operational and commercial efficiency and

improved viability of State power utilities; improving delivery of services and achieving cost effectiveness through

technical, managerial and administrative restructuring of utilities; creating an environment that will attract private

capital, both domestic and foreign, to supplement public sector investment; operating State power utilities in a manner

that enables them to generate sufficient returns to meet operational and investment requirements; and achieving energy

conservation through integrated resource planning, demand side management and minimizing waste.

Page 73: Shelf Prospectus

71

We were established as an integral part of, and continue to play a strategic role in, the GoI’s initiatives for the

development of the power sector in India. We work closely with GoI instrumentalities, State governments and power

sector utilities, other power sector intermediaries and private sector clients for the development and implementation of

policies and structural and procedural reforms for the power sector in India. In addition, we are involved in various GoI

programs for the power sector, including acting as a nodal agency for the UMPP and the R-APDRP and as a bid process

coordinator for the ITP scheme.

Ultra Mega Power Projects (UMPP)

The GoI has introduced the UMPP program with the objective of developing large capacity power projects in India. We

have been designated to act as a nodal agency by the GoI for the development of UMPPs, each with a contracted

capacity of 3,500 or above. These UMPPs involve economies of scale based on large generation capacities based at a

single location, utilize super critical technology to reduce emissions, and potentially have lower tariff costs for

electricity generated as a result of these factors and a result of the tariff being based on international competitive

bidding processes adopted for the selection of developers.

The CEA is the technical partner for the development of these UMPPs while the MoP is involved as a facilitator. As of

March 31, 2011, 16 UMPPs have been identified, located in Madhya Pradesh, Gujarat (two), Chhattisgarh, Karnataka,

Maharashtra, Andhra Pradesh (three), Jharkhand (two), Tamil Nadu (two) and Orissa (three). As of March 31, 2011, we

had incorporated a total of 12 wholly-owned SPVs for the UMPPs. In relation to such SPVs, we in conjunction with the

MoP and the CEA will undertake preliminary site investigation activities and obtain appropriate regulatory and other

approvals (including for land, water, the environment and for power selling) necessary to conduct the bidding process

for these projects. Four of these SPVs have been transferred to successful bidders. The remaining SPVs are proposed to

be eventually transferred to successful bidder(s) selected through a tariff based international competitive bidding

process in accordance with the guidelines for Determination of the Tariff By Bidding Process for Procurement of Power

by distribution licensees, 2005 as amended. The successful bidders are then expected to develop and implement these

projects.

We earn revenue from our involvement with UMPPs through: (i) interest income on expenditure incurred by us prior to

handing over the relevant SPVs to the successful bidder, which are typically in the form of loans extended by us to

these SPVs; and (ii) fee income. In certain cases, we also hold, on behalf of the SPV, any “commitment advances”

received by the SPV from the procurer of the project for the purpose of meeting the initial expenses of the SPV. We

typically invest any unused portion of the commitment advances as part of our ongoing investment activities and pay

the SPV our average rate of return on this amount. In addition, we may earn interest income by extending loans in the

future to such projects.

Independent Transmission Projects (ITP)

In April 2006, the MoP introduced a tariff based competitive bidding process for ITPs, similar to that followed for

UMPPs, for the development of transmission systems through private sector participation. We have been nominated as

a bid process coordinator by the MoP for the development of certain ITPs.

Four SPVs, were initially incorporated under ITPs. These SPVs undertake preliminary survey work, identify

transmission routes, prepare survey reports, initiate the processes of land acquisition and forest clearances if applicable,

and are also responsible for conducting the bid process. We earn revenue from our involvement with ITP projects in a

manner similar to the UMPPs. Of the four SPVs, Bokaro-Kodarma Maithon Transmission Company Limited was

liquidated in December, 2010 and another SPV namely, East North Interconnection Company Limited has been

transferred to the successful bidder on March 31, 2010. Request for proposals the other two SPVs, Jabalpur

Transmission Company Limited ("JTCL") and Bhopal Dhule Transmission Company Limited ("BDTCL") were issued

on August 30, 2010 and September 15, 2010, respectively, and letters of intent for JTCL and BDTCL were issued to the

successful bidder Sterlite Transmission Projects Private Limited on January 19, 2011 and January 31, 2011 respectively.

JTCL and BDTCL have been transferred to Sterlite Transmission Projects Private Limited on March 31, 2011, after

obtaining the requisite approvals from our Board, the board of directors of PFCCL and the MoP.

In addition, the MoP has appointed PFCCL as the bid process coordinator on March 16, 2011 for two ITPs. The board

of directors of PFCCL has on March 24, 2011 approved the proposal for incorporation of two SPVs to facilitate the

development of these two ITPs, which is subject to the approval of our Board. Our Board in its meeting on April 19,

2011 has approved the incorporation of these two SPVs.

Accelerated Power Development and Reform Programs

Page 74: Shelf Prospectus

72

The GoI introduced the Accelerated Power Development Program ("APDP") in fiscal 2001 as part of the reform of the

Indian power sector. During the 10th Plan, the GoI subsequently upgraded the APDP program to the Accelerated Power

Development Reform Program ("APDRP") in fiscal 2003. The objectives of this program were to improve the financial

viability of state power utilities, reduce aggregate technical and commercial losses ("AT&C") losses, improve customer

satisfaction and increase the reliability and quality of the power supply by reducing outages and interruptions, with a

focus on urban and industrial areas.

APDRP aimed at reforming the power distribution sector by providing investment and incentives to SEBs and SPUs

and distribution companies to strengthen and improve transmission, sub-transmission systems and distribution

networks.

In July 2008, APDRP was restructured and the MoP launched the Restructured Accelerated Power Development and

Reforms Program ("R-APDRP"), with focus on, amongst others, establishment of base line data, fixation of

accountability and reduction of AT&C losses through strengthening and upgrading of transmission, sub transmission

and distribution network, and adoption of IT systems during the 11th Plan.

R-APDRP is required to be implemented in three parts. Part-A focuses on establishment of IT enabled baseline data

acquisition systems and Supervisory Control and Data Acquisition ("SCADA") systems. Part-B aims at reduction in

AT&C loss level to less than 15% on a sustainable basis in five years, by achieving improvements in transmission, sub-

transmission and distribution systems.

We were designated to act as the nodal agency to run APDRP as well as R-APDRP, to provide a single window service

under the program, in coordination with the agencies involved, such as the MoP, Steering Committee, CEA, NTPC,

PGCIL, other statutory bodies (if required) and various consultants to achieve the speedy and timely completion of

projects, and therebyassist the utilities in achieving loss reduction targets. We are paid a 'nodal agency fee' for the

services rendered in running the R-APDRP. In Part-A of the R-APDRP, the GoI will provide 100% of the loan through

budgetary support to initiate the project, which is meant to be converted into a grant if the required base-line data

system is established within a stipulated time frame. The loan provided to state power utilities for R-APDRP Part-A

projects shall be converted to grant only on satisfactorily completing the projects within three years of sanction and

verification of the same by such independent agencies. In Part-B, the GoI will provide funding of up to 25.0% of the

project cost in the form of a loan (90% for special category states), 50.0% of which will be converted into a grant in five

equal tranches if the project achieves AT&C loss levels of 15.0% on a sustainable basis for a period of five years.

We have appointed a process consultant to assist in running the R-APDRP. We have also empanelled IT consultants

("ITC") and IT Implementing Agencies ("ITIA") and have formulated an RfP for ITC and model RfP for ITIA. Further,

we have empanelled SCADA/DMS consultants ("SDC"), SCADA Implementing agencies ("SIA") and have formulated

a RfP for SDC and model RfP for SIA. In order to monitor the implementation of R-APDRP, a fully dedicated web-

portal has been developed by an IT advisor in consultation with the Company. Third Party Independent Evaluation

Agencies for Energy Accounting have been appointed for all States to verify baseline AT&C losses and AT&C losses,

while third party independent evaluation agencies for IT are in process of being appointed.

The table below shows the cumulative sanctions and disbursements under R-APDRP as on March 31, 2011:

Particulars Amount (in `Crores)

Sanctions 21,820.67

Disbursements 3,902.88

As of March 31, 2011, the cumulative sanctions under R-APDRP as per the MoP’s Steering Committee are ` 21,820.67

crores. As of March 31, 2011, the R-APDRP is being implemented in approximately 1,401 towns in India. As a

majority our loan portfolio is in the State power sector, improvement of the performance and the financial health of the

State power sector is expected to enhance the quality of our loan assets. The Part-B distribution strengthening projects

under R-APDRP envisages funding of 25.0% of the project cost from the GoI, which we believe will create an

opportunity for us to provide the balance funding for the projects.

Distribution Reform, Upgrades and Management (DRUM)

Distribution Reform, Upgrades and Management ("DRUM") is an Indo-US joint initiative developed by the MoP in

conjunction with the United States Agency for International Development with a planned funding of US$30.00 million.

The objective of DRUM is to demonstrate commercially viable electricity distribution systems that provide reliable

Page 75: Shelf Prospectus

73

power of sufficient quality to consumers and to establish a commercial framework and a replicable methodology to that

adopted by Indian financial institutions for the provision of non-recourse financing for DRUM activities and programs.

We have been appointed as a principal financial intermediary and provide management support for this initiative. Our

responsibilities include provision of management and implementation support, coordination of all relevant stakeholders,

acting as a financial intermediary and banker for supervision of funds (loans and grants) and developing a mechanism

for leveraging resources of other financial institutions and banks.

Consultancy Services

In addition to our lending activities, we provide various technical consultancy and advisory services for power sector

projects. We provide consultancy and other fee-based services to State power utilities, power distribution licensees,

IPPs, public sector undertakings and SERCs. We also provide fee-based services for various GoI programs, including

acting as a nodal agency for UMPP and R-APDRP projects and as a bid process coordinator for ITP scheme projects.

Other consultancy and advisory services include: bid process coordination for power procurement by distribution

licensees through tariff based competitive bidding process; renewable and non-conventional energy schemes; coal block

joint ventures and selection of developers for coal blocks and linked power projects; project advisory services including

selection of an EPC contractor; advisory services relating to policy reform, restructuring and regulatory aspects; and

assistance in relation to capacity building and human resource development.

We also intend to focus on acquisition advisory services for power sector projects, including identification of target

projects and potential acquirers for acquisitions and consolidation opportunities, and also provide techno-commercial

appraisal of target projects.

Resource Mobilization

Our primary sources of funds include equity capital, internal resources and domestic and foreign borrowings. Our

borrowings reflect various sources, maturities and currencies, and include bonds and term loans, as well as commercial

paper. In addition, historically most of our borrowings have been on an unsecured basis.

The following table sets forth certain information relating to our Rupee-denominated and foreign currency denominated

borrowings as at the respective dates indicated:

Partculars

As of March 31,

2007 2008 2009 2010 2011

`̀̀̀ Crores % of total `̀̀̀ Crores % of total `̀̀̀ Crores % of total `̀̀̀ Crores % of total `̀̀̀ Crores % of total

Rupee 31,661.07 94.3 38,413.77 94.5 49,570.65 95.0 64,349.55 95.9 80,636.04 94.2

Foreign currency(1) 1,923.11 5.7 2,234.04 5.5 2,589.50 5.0 2,758.86 4.1 4,962.53 5.8

Total 33,584.18 100.0 40,647.81 100.0 52,160.15 100.0 67,108.41 100.0 85,598.57 100.0

(1) The Rupee equivalents of foreign currency borrowings are based on the bank selling rate at the end of the relevant fiscal

period.

Rupee resources

Our primary sources of funds are Rupee-denominated bonds and term loans availed in India.

A significant percentage of our Rupee-denominated borrowings are raised through the issuance of privately placed

bonds in India. As of March 31, 2011, we had outstanding borrowings aggregating ` 56,136.99 Crores in the form of

bonds and ` 22,258.00 Crores in the form of term loans from Indian banks and financial institutions. In addition, we

were recently classified as an IFC, which enables us to further diversify our borrowings through the issuance of Rupee-

denominated infrastructure bonds that offer certain tax benefits to bondholders.

The following table sets forth certain information relating to our Rupee resources as of the dates indicated:

((((`̀̀̀ Crores)

Particulars As of March 31,

2007 2008 2009 2010 2011

Non-taxable bonds(1)

275.50 275.50 125.00 50.00 0.00

Taxable bonds(2)

16,136.37 23,267.77 35,354.15 45,751.43 56,136.99

Term loans from Indian banks

and FIs

15,249.21 14,870.50 14,091.50 18,548.12 22,258.00

Interest subsidy from the GoI 1,231.63 1,066.75 908.94 663.49 451.87

Page 76: Shelf Prospectus

74

Total 32,892.71 39,480.52 50,479.59 65,013.04 78,846.86

(1) Bonds that offer certain tax benefits to the bondholders.

(2) Bonds that do not offer any tax benefits to the bondholders.

Foreign currency resources

We have in the past raised foreign currency funds through syndicated loans, loans from multilateral agencies and other

sources such as FCNR(B) loans, which are foreign currency loans for specific end uses (such as infrastructure) and at

interest rates linked to LIBOR. The following table sets forth certain information relating to our foreign currency

borrowings by source, as at the respective dates indicated:

((((`̀̀̀ Crores)

Particulars As of March 31,

2007 2008 2009 2010 2011

ADB I and II 214.74 185.95 182.25 113.67 63.28

ADB new loan 48.87 81.25 110.49 97.66 96.26

Credit Nationale (now Natexis

Banque)

114.09 117.20 119.38 100.14 97.23

World Bank 3.00 2.41 2.62 1.87 1.37

KfW – Portion I 62.65 65.71 68.43 58.81 58.86

KfW – Portion II 28.97 23.31 22.12 16.91 14.54

Fixed Euro Notes 468.64 464.98 476.32 0.00 0.00

Syndicated loan – IV 466.29 0.00 0.00 0.00 0.00

Syndicated loan – V 437.58 406.95 476.00 0.00 0.00

EDC Canada 12.64 3.86 0.00 0.00 0.00

FCNR(B) Loans(Long-term) 65.66 160.44 205.80 181.98 180.56

USPP - 721.98 926.10 820.44 812.52

Syndicated bank loan VII - - - 1,367.40 1,354.20

Syndicated bank loan VIII - - - - 1,114.52

Syndicated bank loan IX 1,169.19

Total 1,923.11 2,234.04 2,589.50 2,758.86 4,962.53

We have recently been classified as an IFC. As an IFC, we are also eligible to raise, under the automatic route (without

the prior approval of the RBI), ECB up to US$500.00 million each fiscal year, subject to the aggregate outstanding

ECBs not exceeding 50.0% of our Owned Funds. In addition, in February 2011 we have availed of a JPY, denominated

foreign currency loan equivalent to US$260.00 million. For further details, see section titled "Financial Indebtedness"

on page 115.

Credit Ratings

CRISIL has, vide its letter dated August 25, 2011, reaffirmed “AAA/Stable” (pronounced “Triple AAA with stable

outlook”) rating to our long-term borrowings for ` 275 billion inclusive of the proposed issue of Bonds.

ICRA has reconfirmed our ‘AAA’ with a ‘Stable’ outlook rating, vide its letter dated September 7, 2011 for the long

term borrowing programme of ` 27,500 Crores inclusive of the proposed issue of Bonds. These ratings have factored in

considerations such as the GoI’s ownership, our strategic importance to the GoI, its comfortable capitalization, strong

market position, adequate resource profile, and sound asset quality despite the poor credit profile of its key customers.

RISK MANAGEMENT

We have put in place an Integrated Enterprise wide Risk Management (“IRM”) policy and procedures. IRM policy and

procedures lists all risks we face which may have an impact on profitability / business of the company, their root causes,

existing mitigations factors and action plans for further mitigations, where required. The risks have been prioritized and

key performance indicators identified for measuring and monitoring. A Risk Management Committee of the Board is

constituted for monitoring the risks, mitigations and implementation of action plans.

Important risks faced by our Company are:

• Credit Risk

• Security Risk

• Liquidity Risk

• Interest Rate Risk, and

Page 77: Shelf Prospectus

75

• Foreign Currency Risk

• Operational Risk

A. Credit Risk

Our Borrower’s eligibility criteria place an emphasis on financial and operational strength, capability and competence.

While we encourage certain schemes through differential lending rates, the eligibility criteria and funding decision is

always purely guided by the merit of the project and no funds are pre-allocated.

Our lending policies are set out in its Operational Policy Statement (“OPS”). In addition, we place emphasis on funding

projects with short lead times as well as on-going projects.

We lend to projects meeting the following criteria:

a) are techno-economically sound with Financial or Economic Rate of Return of not less than 12% (as may be

applicable);*

b) are feasible and technically sound and provide optimal cost solutions for the selected alternative;

c) are compatible with integrated power development and expansion plans of the State / Region / Country;

d) compliance to environmental guidelines, standards and conditions;

e) schemes should have obtained the required clearances;

f) all inputs required for the implementation and operation of the projects are tied up and proper procurement

and implementation plans have been drawn up.

*In case of environmental up-gradation, meter installation, load despatch, computerisation and communication, R&D

and non-conventional energy projects the Rate of Return of 12% i.e (Economic or financial) may not be insisted upon.

We evaluate the credit quality of all the Borrowers by assigning ratingon the basis of various financial and non-financial

parameters. Further, Integrated rating (Combination of Entity Rating & Project Rating) is worked out for Private Sector

generation projects. The interest rates, requirement of collateral securities and exposure limits are worked out on the

basis of integrated ratings.

B. Security Risk

We extends financial assistance to those State power utilities which provide confirmation that we would have a priority

claim on the particular utility’s surplus revenue over the loan granted by the State Government to the SEB's. The

majority of our outstanding loans to the state level utilities are secured by charge on assets, some are secured by

irrevocable guarantees given by the respective State Governments. In most of the cases of our Loans, default escrow

accounts are used as a measure of credit enhancement mechanism. Under this arrangement, the borrower along with the

escrow bank agrees to route through the designated account a specified level of cash flow with an arrangement that the

escrow agent will directly pay to us in case of default.

In the case of private power projects, security is normally obtained through first priority pari-passu charge on assets,

and Trust and Retention Account (“TRA”). In certain cases, collateral securities like personal and corporate guarantees

are also insisted upon. In the case of private sector Borrowers, the eligibility is assessed on the basis of various factors

such as past performance of the promoters, their experience, capacity to bring in equity, project soundness etc.

C. Liquidity Risk

The Corporation has put in place an effective Asset Liability Management System, constituted an Asset Liability

Management Committee (“ALCO”) headed by Director (Finance). ALCO monitors risks related to liquidity and interest

rate and also monitors implementation of decisions taken in the ALCO meetings. The liquidity risk is being monitored

with the help of liquidity gap analysis. The Asset Liability Management framework includes periodic analysis of long

term liquidity profile of asset receipts and debt service obligations. Such analysis made every month in yearly buckets

for the next 10 years, is being used for critical decisions regarding the time, volume and maturity profile of the

borrowings, creation of new assets and mix of assets and liabilities in terms of time period (short, medium and long-

term).

To ensure that we always has sufficient funds to meet its commitments, our Operational Policy Statement (OPS)

requires it to maintain satisfactory level of liquidity to ensure availability of funds at any time up to three months'

anticipated disbursements. At present surplus funds are invested by way of short-term deposits with banks and mutual

funds.

Page 78: Shelf Prospectus

76

D. Interest Rate Risk

Interest rates are dynamic and dependent on various internal and external factors including cost of borrowing, liquidity

in the market, competitors' rates, movement of benchmarks like AAA bond / Gsec yield, RBI policy changes, etc.

We reviews its lending rates periodically based on prevailing market conditions, borrowing cost, yield, spread,

competitors’ rates, sanctions & disbursements; etc. Our incremental rupee lending interest rates is normally made with

either 3 year or 10 year interest re-set clause.

The interest rate risk is managed by analysis of interest rate sensitivity gap statements, evaluation of Earning at Risk

(EaR) on change of interest and creation of assets and liabilities with the mix of fixed and floating interest rates. In

addition, all loan sanction documents specifically give us the right to vary interest rate on the un-disbursed portion of

any loan.

E. Foreign Currency Risk

The Corporation has put in place Currency Risk Management (CRM) policy to manage risks associated with foreign

currency borrowings. The Corporation manages foreign currency risk by lending in foreign currency and through derive

products (like currency forward, option, principal swap, interest rate swap and forward rate agreements) offered by

banks, who are authorised dealers. We Risk Management Committee of senior officers headed by our Executive

Director (Finance) and a forex consultant to guide in hedging. Periodically, once in a quarter, the details of foreign

currency exposure, open position and hedging done are submitted to the Risk Management Committee of the Board, the

Audit Committee and the Board of Directors. As on, March 31, 2011, we have lent in foreign currency or entered into

hedging transaction to cover 14.86% of its foreign currency principal exposure.

F. Operational Risk

Operational risks are risks arising from inadequate or failed internal processes, people and systems or from external

events. We have established systems and procedures to reduce operational risk as outlined below:

Operational controls in project finance activities.

Our Operational Policy Statement, operational guidelines and manuals provide a detailed description of the systems and

procedures to be followed in the course of appraisal, approval, disbursement and recovery of a loan. Various checks and

control measures have been built-in for timely review of the operating activities and monitoring of any gaps in the

same. A significant proportion of the activities are subject to regular monitoring and auditing, including loan sanctions,

disbursements and recovery. In addition to this, many important activities are monitored on a periodic basis.

Operational controls in treasury activities.

Our Operational Policy Statement and manual for deployment of surplus funds provide a description of operations to be

followed, with suitable exposure and counterparty limits. Compliance with our guidelines is monitored through internal

control and a well-developed audit system including external and internal audits.

Legal risk

Legal risk arises from the uncertainty of the enforceability of contracts relating to the obligations of our borrowers. This

could be on account of delay in the process of enforcement or difficulty in the applicability of the contractual

obligations. We seek to minimize the legal risk through legal documentation that is drafted to protect our interests to the

maximum extent possible.

PRUDENTIAL NORMS

We, being a Government Company, is exempt from applicability of the prudential norm directions of Reserve Bank of

India. However, we have been following its own set of prudential norms, since 2003-04, which have been revised from

time to time. We are following RBI exposure norms for lending to Private Sectors. We have been granted exemption

from applicability of RBI prudential exposure norms till March 2012 in respect of lending to State/Central entities and

is required to submit a roadmap to RBI for achieving adherence to the prudential regulations of RBI, including further

capitalization.

Page 79: Shelf Prospectus

77

Further, we have been classified as an Infrastructure Finance Company (“IFC”) in July 2010, a new category of NBFC

introduced by RBI. We are required to comply with the eligibility criteria with classification as an IFC, including 15%

CRAR (with a minimum Tier I capital of 10%).

As an IFC, we can avail of the provisions applicable to IFC like additional exposure for lending.

ISO 9001: 2008 CERTIFICATION

Power Finance Corporation Limited, as a whole, has obtained ISO 9001:2008 certification with effect from January 7,

2010, valid until January 6, 2013, in respect of the following scope:

"To provide financial assistance for projects in the power and allied sectors and recovery of the same. To arrange

funds from domestic and international markets in a cost effective manner and proper utilization of the same through

sound fund management, appraisal, performance analysis, documentation and project monitoring and facilitating

institutional reforms."

HUMAN RESOURCE DEVELOPMENT

We are a lean organization and boasts of the highest per employee profitability in the country. As at March 31, 2011,

we have 365 employees of whom 255 are executives. This indicates that the Corporation enjoys a high level of

employee productivity. In recognition of this the Corporation has been conferred with the Dalal Street’s “First DSIJ

Award 2009” in the category of “Highest Profit per Employee”.

In the field of Human Resource Development, we stresses on the need to continuously upgrade the competencies of its

employees and equip them to keep abreast of latest developments in the sector and industry practices. The Company is

in a knowledge intensive business and is committed to enhance the professional skills and knowledge of its employees.

It has in place a systematic training plan where the training needs are assessed and professional skills are imparted at all

levels of employees through customized training interventions. Our employees have an in-depth exposure to the various

fields of the power sector including critical areas such as project appraisal, project financing, international finance and

domestic resource mobilisation.

We, in its role as a Development Financial Institution has also been supporting State Power Utilities (SPUs) through a

variety of capacity building measures. One such initiative is in the area of need-based training and capacity

development to build up their institutional and managerial capacities in keeping with the increased commercial

orientation of these entities. During financial year 2009-10, we had organized a specialized programme for personnel of

various power utilities across the country on “E- Procurement in Power Sector.

We is also functioning as the Principal Implementation Partner under the Distribution Reforms, Upgrades &

Management (DRUM) initiative of Ministry of Power and Government of United States through United States Agency

for International Development (USAID), which focuses on development of the critical Power Distribution Sector.

Under this initiative, 125 training programmes were organized during the financial year 2010-11 through which 2875

number of personnel were trained from various power utilities across the country.

Corporate Social Responsibility

We are in the process of streamlining its Corporate Social Responsibility (“CSR”) activities through implementation of

Corporate Social Responsibility Policy in the company. These CSR shall support initiatives which will bring qualitative

change in the daily life of the society/community without comprising on ecological conditions. The company has

entered into a Memorandum of Understanding (MOU) with GoI for spending 0.05% of PAT (Profit after Tax) towards

CSR activities as a part of its Corporate Social Responsibility.

TAXATION

The company enjoys several tax concessions (detailed below), which have aided in reducing the company’s tax liability.

Section 36(1)(vii a)(c) of the Act allows deduction of amount not exceeding 5% of total income in respect of any

provision made for bad & doubtful debts.

Section 36(1)(viii) of the Act allows deduction for special reserve created & maintained for an amount not exceeding

20% of profit derived from business of long term finance.

Page 80: Shelf Prospectus

78

The above exemptions and provisions and depreciation charges on the leased assets has resulted reduction in tax

liability of the Corporation.

COMPETITION

As the leading financial institution in India dedicated to funding the power sector, we have built up significant expertise

in assessing power projects, as well as developing an ongoing relationship with the State Governments and power

utilities. It has therefore succeeded in establishing a niche position in its field of expertise. In relation to private sector

projects, we believe that it is likely to face competition from Banks and other Indian financial institutions and, possibly

from international project financiers. In view of the currently limited resources to devote to this area and the anticipated

scale of financing required in the Indian power sector, it is anticipated that our business will expand.

Consortium Lending Group

Consortium Lending Group (CLG) has been set up with an aim to give fillip to Consortium Lending Operations,

particularly through the Power Lenders’ Club (PLC) which has 21 members including LIC, HUDCO and 18 Indian

banks. PLC has already adopted a Common Loan Approach Form and standardized the loan documents for the

convenience of the borrowers and lenders.

RE & CDM Group

The potential of renewable energy to provide clean and sustainable energy is universally accepted. Government of India

is giving high focus for promotion of renewable energy through Electricity Act 2003 and National Electricity Policy.

Renewable energy has been given a central place in Government of India’s National Action Plan on climate change.

The State Electricity Regulatory Commissions (SERCs) in various states are making it mandatory for distribution

utilities to procure minimum percentage of energy from renewable energy generation sources and notifying special

tariffs for solar, wind, biomass and small hydro generation projects for purchase of power by State Power Utilities. To

tap the Renewable Energy business in state and private sector, we are giving the enhanced focus for financing of

Renewable Energy Projects. A new group for RE&CDM has been set up in August 2008 in this regard.

Facilitation Group

The ambitious capacity addition programme of Government of India envisaged for 11th

& 12th

Plan and even beyond,

requires augmentation of country’s equipment manufacturing Capacity in all the spheres of power sector viz.,

Generation, Transmission and Distribution. Further, existing thermal power projects (coal & gas based) are already

facing shortage of fuel (coal & gas) and have to resort to import of fuel. Based on current projections of demand and

supply of fuel, the gap is likely to widen and there is need to enhance fuel supply so as to ensure efficient utilization of

existing capacity as well as proposed/expected capacity addition in future. Considering these aspects GoI has already

initiated steps including the allocation of various coal blocks/mines to both State Sector as well as private sector entities

to develop and produce coal for power sector. The port facilities are also being enhanced to facilitate more import of

coal, gas and oil.

All these developments offer an opportunity to us to expand its business in these areas i.e., financing of development/

expansion of fuel supply sources (coal, Gas & Oil) and its distribution (rail network, pipelines, ports, jetties etc) and

equipment manufacturing. Recognizing the need and opportunity, we have taken proactive action in this area of

business by setting up Facilitation Group to explore the opportunities of expanding our business in these areas.

Further, removing the biggest bottlenecks i.e., availability of finance for these projects (fuel supply sources

development / expansion and equipment manufacturing) is expected to ensure that the country’s massive capacity

addition programme will be successful which in turn will help us in its core business i.e., financing of various projects

in power sector–Generation, Transmission and Distribution.

Equity Funding

Equity investment business is generally considered as a logical extension of debt business. We are endeavouring to

make a mark in the area of equity investment so as to capitalize on its vast domain experience that it has attained during

its over 20 years of operations in power sector debt financing. We aim to leverage its financial strength, large debt

providing capability and power sector expertise to invest in equity of attractive power projects. Further, we also intend

to enter equity syndication business so as to expedite early financial closure of projects leading to faster capacity

Page 81: Shelf Prospectus

79

addition. This would help us to enhance its fee-based income also. Over a period of time, we endeavour to build an

equity portfolio of power assets which could provide consistent gains in the form of dividend and/or capital

appreciation. In this direction, we have recently established an Equity Funding Group to facilitate and develop this

business area.

Our plans to increase its disbursements will require us to raise more funds from new as well as existing sources. We aim

to become major player in the financing of private sector power projects in India. Given its expansion plans, we seek to

tap new markets and diversify sources for raising resources for on-lending purposes.

As a development financial institution, we are also concerned with the balanced development of the Indian power sector

and looks to involve itself in the development of the Indian power sector’s policy and regulatory framework. We aim to

enhance its role in influencing grass root reforms to set the basis for overall privatisation.

Acquisition Advisory Services

The development of institutional and regulatory mechanism has improved the viability of power sector. Power

exchange has created immense investor interest in merchant power due to higher margins. Not only the existing players

have drawn up ambitious investment plans, but new players are also entering the sector in a big way. Going forward,

there would be an increased participation of private sector players in the power sector development based on future

requirement of the sector. The new players may set up new power projects or acquire power projects under

implementation/completed stage.

There is increasing trend in demand supply gap which is creating the requirement of procurement of power from private

sector through competitive bidding as well. Besides, there is high demand for efficiency and economies in the

generation which will lead to the lower cost of tariff. Open access and power trading are likely to bring in fierce

competition in future. The above demanding situation is likely to lead to consolidation in the power sector and hence,

there is need for projects / partners for mergers & acquisitions in order to bring in synergies & economies of scale.

It is in this area, we have created Acquisition Advisory Services Unit. The broad scope of services offered by us

through this unit would include; identification of target projects for acquisition/mergers; preliminary due diligence of

the projects; detailed techno-commercial appraisal of projects, finding out the partners for merger and acquisition, etc.

with overall objective of the growth of the sector.

As a futuristic thinking, an initiative has been taken to examine the possibility of establishing or acquiring a bank. In

this regard, we are in the process of appointment of Consultant for “Exploring the Possibility of Acquisition of a Bank

or Establishing a Bank”.

Properties

Our registered office is located at ‘Urjanidhi’, 1, Barakhamba Lane, Connaught Place, New Delhi 110 001. We had

entered into a memorandum of agreement dated February 5, 2002 with the President of India in relation to our

registered office premises, pursuant to which we were required to execute a perpetual lease upon completion of

construction of the building where our registered office is situated. There are two residential premises owned by us in

New Delhi measuring 300 sq. yds. each, which were owned by us vide two separate sale deeds both dated August 26,

1997, having registration no. 8669 & 8668, both registered on September 01, 1997 from The President of India through

The Director, Ministry of Finance, Department of Revenue, CBDT, New Delhi in Greater Kailash-II and Jangpura

Extension, respectively. In addition to the above, we also have two regional offices in Mumbai and Chennai. Our

Mumbai office admeasuring 1524 sq. ft. has been taken on Lease & License vide Agreement dated January 11, 2011 for

a limited period of eleven months commencing from January 06, 2011. Our Chennai office admeasuring about 1520 sq.

ft. has been taken on rent via rent agreement dated February 16, 2011 for a period of 3 years commencing from March

01, 2011. Further, we had taken on lease a property situated at Guwahati, Assam for our office premises vide lease deed

dated August 04, 2010 for a period of three years commencing from July 20, 2010.

Page 82: Shelf Prospectus

80

REGULATIONS AND POLICIES

Our Company is a systemically important, non-deposit taking NBFC and is notified as a public financial institution

under section 4A of the Companies Act and also classified as Infrastructure Finance Company by RBI vide its letter

dated July 28, 2010. The business activities of NBFCs and public financial institutions are regulated by various RBI

regulations. However, our business operations are not regulated by the RBI regulations applicable to NBFCs and

public financial institutions, pursuant to an amendment to the NBFC regulations [Ref: DNBS.

(PD).CC.No.12/02.01/99-2000] dated January 13, 2000 whereby the RBI exempt government companies, conforming to

section 617 of the Companies Act from the applicability of the provisions of the RBI Act relating to maintenance of

liquid assets, creation of reserve funds and the directions relating to acceptance of public deposits and prudential

norms.

Taxation statutes such as the Income Tax Act, 1961, Central Sales Tax Act, 1956 and applicable local sales tax statutes,

and other miscellaneous regulations and statutes, apply to us as they do to any other Indian company. The statements

below are based on the current provisions of Indian law, and the judicial and administrative interpretations thereof,

which are subject to change or modification by subsequent legislative, regulatory, administrative or judicial decisions.

The following are the significant laws and regulations that govern our operations:

A. NBFC REGULATIONS

The Reserve Bank of India Act, 1934 (“RBI Act”)

The RBI is entrusted with the responsibility of regulating and supervising activities of NBFCs by virtue of the power

vested in it under Chapter IIIB of the RBI Act. The RBI Act defines an NBFC under Section 45-I (f) as:

“(i) a financial institution which is a company;

(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits,

under any scheme or arrangement or in any other manner, or lending in any manner;

(iii) such other non-banking institution or class of such institutions, as the Bank may, with the previous approval of

the Central Government and by notification in the Official Gazette, specify.”

A “financial institution” and a “non- banking institution” have been defined under Sections 45-I(c) and 45-I(e) of the

RBI Act, respectively.

The RBI has clarified through a press release (Ref. No. 1998-99/1269) dated April 8, 1999, that in order to identify a

particular company as an NBFC, it will consider both the assets and the income pattern as evidenced from the last

audited balance sheet of the company to decide its principal business. The company will be treated as an NBFC (a) if its

financial assets are more than 50 per cent of its total assets (netted off by intangible assets); and (b) income from

financial assets should be more than 50 per cent of the gross income. Both these tests are required to be satisfied as the

determinant factor for principal business of a company.

The RBI Act mandates that no NBFC shall commence or carry on the business of a non-banking financial institution

without obtaining a certificate of registration (“CoR”) and having a minimum net owned fund of ` 20 million.. In case

an NBFC does not accept deposits from the public (“NBFCND”), it shall obtain a CoR without authorization to accept

public deposits. All NBFCs are required to submit a certificate from their statutory auditors every year to the effect that

they continue to undertake the business of a non-banking financial institution, thereby requiring them to hold a CoR.

The NBFC must also have a minimum net owned fund of ` 20 million.

As per the Master Circular, DNBS. PD. CC. No. 148 /03. 02.004/2009-10 dated July 1, 2009, issued by the RBI

summarising its Notifications, NBFCs which are housing finance institutions, merchant banking companies, micro

finance companies, mutual benefit companies, government companies, venture capital fund companies, insurance

companies, stock exchanges, stock brokers or sub-brokers, nidhi companies, chit companies, securitization companies

and mortgage guarantee companies have been exempted from complying with certain specified provisions of the RBI

Act.

Public Deposit Regulations

As per the RBI Master Circular No. DNBS (PD) CC No. 143/03.02.001/2009-10) dated July 1, 2009, which

summarises RBI Regulations, certain NBFC-NDs are entitled to certain exemptions from the norms and conditions

Page 83: Shelf Prospectus

81

stipulated on NBFCs taking deposits. In order to benefit from these exemptions, the board of directors of the NBFC-ND

must pass a resolution within certain stipulated time period.

Certain finance companies including inter alia merchant banking companies, government companies, insurance

companies and companies doing business as a stock broker or sub-broker, are exempt from the requirement of obtaining

a CoR or complying with the Public Deposit Regulations.

Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)

Directions, 2007 (“Non-Deposit Accepting or Holding Prudential Norms 2007”)

The RBI by notification dated February 22, 2007 notified the Non-Banking Financial (Non-Deposit Accepting or

Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 ("Non-Deposit Accepting or Holding

Prudential Norms 2007"), which contain detailed directions on prudential norms for a NBFC-ND. Para 1(3)(iv) of the

Non-Deposit Accepting or Holding Prudential Norms 2007, exempts government companies, conforming to Section

617 of the Companies Act and not accepting/ holding public deposit from applicability of Non-Deposit Accepting or

Holding Prudential Norms 2007, except to such extent as specified therein.

In March 2007, our Company initiated discussion with the MoP that our Company should be exempted from the

applicability of NBFC Prudential Norms. This was taken up by the MoP with the RBI through a series of

communication commencing from April 2007, wherein MoP requested the RBI to keep our Company outside the

purview of the NBFC Prudential Norms.

In December 2007, the RBI directed our Company to submit a road map for compliance with the NBFC prudential

norms. The MoP, through its letter dated June 24, 2008, forwarded the roadmap prepared by our Company in relation to

compliance with NBFC 2006 to the RBI wherein our Company agreed to follow exposure norms for private sector

utilities with immediate effect.

Thereafter, the RBI by its letter dated July 31, 2009, directed our Company to comply with the RBI prescribed

prudential norms on exposure norms in respect of all new transactions entered into by our Company. Subsequently

through various letters to RBI and MoP, our Company requested for extension of exemption from exposure norms in

respect of government sector utilities. Thereafter, upon receipt of recommendations from MoP and MoF, the RBI

pursuant to its letter dated March 18, 2010 (“Exemption Letter”), granted extension of the exemption to our Company

from the applicability of the prescribed prudential exposure norms in respect of lending to Central and State government

entities in the power sector until March 31, 2012. Under the Exemption Letter, our Company was required to submit a

roadmap to RBI for achieving adherence to the prudential regulations prescribed by RBI, including further

capitalisation. Further, the RBI advised that State Government guaranteed loans of our Company, which have not

remained in default may be assigned a risk weight of 20%. However, if the loans guaranteed by the State Governments

have remained in default for a period of more than 90 days, a risk weight of 100% should be assigned.

Prudential Norms

As per the Master Circular, DNBS (PD) CC No.225/ 03.02.001/ 2011-12) dated July 1, 2011 issued by the RBI

summarising its Directions (“Prudential Norms”), the RBI has issued detailed directions on prudential norms, which

inter alia, prescribe guidelines on income recognition, asset classification and provisioning requirements applicable to

NBFCs, exposure norms, constitution of audit committee, disclosures in the balance sheet, requirement of capital

adequacy, restrictions and concentration of credits and investments. The Prudential Norms are not applicable to an

NBFC, being an investment company, provided it is (i) holding investments in the securities of its group/ holding/

subsidiary companies and book value of such holding is not less than 90% of its total assets and it is not trading in such

securities (ii) not accepting/holding public deposit, and (iii) is not a systemically important NBFC-ND. Further, the

Prudential Norms do not apply, except to such extent as specified therein, to NBFCs which are government companies

under Section 617 of the Companies Act and not accepting / holding public deposit..

Systemically Important NBFCs -ND

Under Section 2 (1) (xix) of the Prudential Norms, all NBFCs – ND with an asset size of ` 1,000 million or more as per

the last audited balance sheet will be considered as a systemically important NBFC – ND (“NBFC-ND-SI”). All

NBFCs–ND–SI are required to maintain a minimum Capital to Risk Assets Ratio (“CRAR”) of 10% On and from April

1, 2007, an NBFC–ND–SI is not allowed to:

a) lend to (i) any single borrower exceeding 15% of its owned fund; and (ii) any single group of borrowers exceeding

25% of its owned fund;

Page 84: Shelf Prospectus

82

b) invest in (i) the shares of another company exceeding 15% of its owned fund; and (ii) the shares of a single group of

companies exceeding 25% of its owned fund;

c) lend and invest (loans/investments taken together) exceeding (i) 25% of its owned fund to a single party; and (ii) 40%

of its owned fund to a single group of parties.

Pursuant to a notification issued by the RBI on October 29, 2008 (Notification No. DNBS (PD) CC. No.131 /03.05.002

/ 2008-2009) NBFCs-ND-SIs may augment their capital funds by the issuance of perpetual debenture instruments in

accordance with certain specified guidelines. Further, as per a press release dated October 31, 2008 (Press Release:

2008-2009/602), the RBI has permitted NBFCs-ND-SIs to raise short term foreign currency borrowings, under the

approval route subject to certain conditions namely, (a) the NBFCs-ND-SIs would need to comply with the prudential

norms on capital adequacy and exposure norms; (b) multilateral or bilateral financial institutions, reputable regional

financial institutions, international banks and foreign equity holders with minimum direct equity holding of 25% would

need to be the lenders; (c) the funds raised should be used only for refinancing of short term liabilities and no fresh

assets should be booked out of the resources; (d) the maturity of the borrowing should not exceed three years; (e) the

maximum amount should not exceed 50% of the net owned funds or USD 10 million (or its equivalent), whichever is

higher; (f) the all-in-cost ceiling should not exceed 6 months LIBOR + 200 basis points; and (g) the borrowings should

be fully swapped into Rupees for the entire maturity.

KYC Guidelines

The RBI has extended the Know Your Customer (“KYC”) guidelines to NBFCs and advised all NBFCs to adopt the

same with suitable modifications depending upon the activity undertaken by them and ensure that a proper policy

framework of anti-money laundering measures is put in place. The KYC guidelines includes customer identification

procedures, monitoring of transactions and risk management, adherence to KYC guidelines and the exercise of due

diligence by persons authorised by the NBFC, including its brokers and agents.

Corporate Governance Guidelines

Pursuant to an RBI Circular dated May 8, 2007, all NBFC-ND-SIs are required to adhere to certain corporate

governance norms including constitution of an audit committee, a nomination committee, a risk management committee

and certain other norms in connection with disclosure and transparency and connected lending.

Norms for excessive interest rates

In addition, the RBI has, pursuant to its notifications dated May 24, 2007 (Notification DNBS. PD/CC. No. 95/

03.05.002/ 2006-07) and January 2, 2009 (Notification No. DNBS. 204 / CGM (ASR)-2009) requested all NBFCs to

put in place appropriate internal principles and procedures in determining interest rates and processing and other

charges. The board of directors of each NBFC shall adopt an interest rate model taking into account relevant factors

such as cost of funds, margin and risk premium and determine the rate of interest to be charged for loans and advances.

The rates of interest and the approach for gradation of risks shall have to be made available on the websites of the

companies or published in the relevant newspapers. Further, the rates of interest should be annualised rates so that

borrowers are aware of the exact rates that would be charged to the account.

Government companies

The RBI vide its notification (No. DNBS. 193/ DG (VL) - 2007) dated February 22, 2007 has exempt government

companies, conforming to Section 617 of the Companies Act, from the applicability of the Non Banking Financial

(Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. Further, the RBI vide

notification (No. DNBS (PD) CC No. 96/ 03.02.01/ 2007-08) dated July 2, 2007 has exempt government companies,

conforming to Section 617 of the Companies Act, from the Public Deposit Regulations.

B. CLASSIFICATION OF INFRASTRUCTURE FINANCE COMPANIES

Pursuant to the RBI circular dated February 12, 2010, a fourth category of NBFC known as IFC was introduced.

Prior to the inclusion of IFCs, three categories of NBFCs existed, namely, asset finance companies, loan companies

and investment companies. An IFC is defined as an NBFC-ND that fulfils the following criteria:

(i) a minimum of 75 per cent of its total assets should be deployed in infrastructure loans, as defined in Para

2(viii) of the Non-Deposit Accepting or Holding Prudential Norms 2007;

(ii) net owned funds of ` 3,000 million or above;

Page 85: Shelf Prospectus

83

(iii) minimum credit rating 'A' or equivalent of CRISIL, FITCH, CARE, ICRA, or equivalent rating by any other

accrediting rating agencies; and

(iv) CRAR of 15% (with a minimum tier I capital of 10%)

IFCs may exceed the concentration of credit norms applicable to NBFC-ND- SI under Para 18 of the Non-Deposit

Accepting or Holding Prudential Norms, 2007, as under:

(i) in lending to

(a) any single borrower by 10% of its owned fund i.e., total of 25% of its owned fund; and

(b) any single group of borrowers by 15% of its owned fund i.e., total of 40% of its owned fund;

(ii) in lending and investing in (loans/investments taken together) by

(a) 5% of its owned fund to a single party i.e., total of 30% of its owned funds; and

(b) 10% of its owned fund to a single group of parties i.e., total of 50% of its owned funds.

IFCs are eligible to avail, under the automatic route (without prior approval of RBI), ECBs up to US$ 500 million

each fiscal year subject to maximum of 50% of their owned funds, from recognised lenders under the automatic

route.

Laws relating to Issuance of Infrastructure Bonds

The GoI has, pursuant to notification dated September 9, 2011 (“Notification”) issued by it, specified certain bonds

as “long-term infrastructure bonds” (“Infrastructure Bonds”) for the purposes of Section 80CCF of the IT Act. As

per the Notification, the Infrastructure Bonds can be issued by the following: (i) Industrial Finance Corporation of

India; (ii) Life Insurance Corporation of India; (iii) Infrastructure Development Finance Company Limited; and (iv)

an NBFC classified as an IFC by the RBI, during the financial year 2010-11. The volume of issuance during the

financial year shall be restricted to 25% of the incremental infrastructure investments made by the issuer during the

financial year 2009-10 and ‘investment’ for the purposes of the aforesaid limit shall include loans, bonds, other

forms of debt, quasi-equity, preference equity and equity. The Infrastructure Bonds shall have a tenure of a

minimum period of 10 years with a minimum lock-in period of 5 years, after which investors may exit either

through the secondary market or through a buyback facility specified by the issuer in the issue document at the time

of issue. The Infrastructure Bond shall also be allowed to be pledge or lien or hypothecation for obtaining loans

from scheduled commercial banks, after the lock-in period.

The yield of the Infrastructure Bond shall not exceed the yield on government securities of corresponding residual

maturity, as reported by the fixed income money market and derivatives association of India as on the last working

day of the month immediately preceding the month of the issue of the Infrastructure Bonds. The proceeds of the

Infrastructure Bonds shall be utilised towards ‘infrastructure lending’ as defined in the guidelines issued by the

RBI.

C. REGULATION OF FOREIGN INVESTMENT

FEMA Regulations

Foreign investment in India is governed primarily by the provisions of the FEMA which relates to regulation primarily

by the RBI and the rules, regulations and notifications there under, and the policy prescribed by the Department of

Industrial Policy and Promotion, GoI which is regulated by the FIPB.

The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue

of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) to prohibit, restrict or

regulate, transfer by or issue security to a person resident outside India. As laid down by the FEMA Regulations, no

prior consent and approval is required from the RBI, for FDI under the “automatic route” within the specified sectoral

caps. In respect of all industries not specified as FDI under the automatic route, and in respect of investment in excess

of the specified sectoral limits under the automatic route, approval may be required from the FIPB and/or the RBI.

Additionally, under the FEMA Regulations if a person resident in India proposes to transfer to a person resident outside

India, any shares of an Indian company by way of sale, approval of the GoI is required for such transfer, which is to be

followed up by an approval from the RBI.

Page 86: Shelf Prospectus

84

FDI Policy

As per Consolidated FDI Policy effective from April 1, 2011, transfer of shares from resident to non resident by way of

sale in financial services sector requires prior permission of Reserve Bank of India which was earlier allowed under the

automatic route subject to the sectoral policy on FDI.

However, foreign direct investment in NBFCs engaged in leasing and finance fall under the automatic approval route

for FDI/NRI investment up to 100%.

Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000

The RBI in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Borrowing or

Lending in Foreign Exchange) Regulations, 2000 (“Regulations”) to regulate the borrowing and lending in foreign

exchange by a person resident in India. Pursuant to the Regulations, the RBI issued guidelines regulating external

commercial borrowings from time to time. An External Commercial Borrowing (“ECB”) refers a to commercial loan, in

the form of a bank loan, buyers’ credit, suppliers’ credit, securitised instrument availed from Non Resident lenders with

minimum average maturity of three years. Under the current policy, an ECB can be accessed from internationally

recognized sources under two routes, viz., (i) automatic route and (ii) the approval route. The guidelines regulate the

maintenance of prudent limits for total external borrowings, end use, all in cost ceilings, reporting requirements

amongst other terms of borrowing. Under the current ECB policy, our Company is required to take the prior approval of

the RBI for availing an ECB.

D. EXTERNAL COMMERCIAL BORROWINGS

The current policy of the RBI directly relating to External Commercial Borrowing (“ECB”) is embodied in the Foreign

Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, as amended from time to time

and as summarised under the Master Circular No. 09/2011-12 dated July 1, 2011 (“ECB Master Circular”). The ECB

Guidelines state that ECB refers to commercial loans in the form of bank loans, buyers’ credit, suppliers’ credit and

securitized instruments (e.g., floating rate notes and fixed rate bonds) availed from non-resident lenders with a

minimum average maturity of three years. Funds received by an Indian company from the issue of preference shares,

whether nonconvertible, optionally convertible or partially convertible, or the issue of debentures that are not

mandatorily and compulsorily convertible into equity shares are considered debt, and accordingly, all norms applicable

to ECBs (including those relating to eligible borrowers, recognised lenders, amount and maturity and end-use

stipulations) apply to such issues.

ECB can be accessed under two routes, viz. (i) automatic route, and (ii) approval route. The ECB Guidelines are subject

to amendment from time to time. Investors are urged to consult their own advisors in connection with the applicability

of any Indian laws or regulations.

Automatic route

Under the automatic route, the following are the recognised borrowers viz. (i) corporates including those in hotel,

hospital, software sectors (registered under the Companies Act except financial intermediaries, such as banks, financial

institutions, housing finance companies and NBFCs, (ii) units in special economic zones, and (iii) non-government

organizations engaged in micro finance activities. Individuals, Trusts and non-profit making organizations are not

eligible to raise ECB Similarly the recognised lenders are as follows viz. (i) international banks, (ii) international capital

markets, (iii) multilateral financial institutions / regional financial institutions and Government owned

development financial institutions,, (iv) export credit agencies, (v) suppliers of equipment, (vi) foreign collaborators

and (vii) foreign equity holders (other than erstwhile ‘Overseas Corporate Bodies’). A foreign equity holder to be

eligible as recognized lender under the automatic route would require minimum holding of paid up equity in the

borrower company as set out below:

(a) For ECB up to USD 5 million - minimum paid up equity of 25 per cent held directly by the lender, and

(b) For ECB more than USD 5 million - minimum paid up equity of 25 per cent held directly by the lender and debt-

equity ratio not exceeding 4:1 (i.e., the proposed ECB not exceeding four times the direct foreign equity holding)

Approval route

Certain proposals for ECB are covered under the approval route, including (a) ECB with minimum average maturity of

five years by NBFCs from multilateral financial institutions and others; (b) Infrastructure Finance Companies

(IFCs) i.e. Non-Banking Financial Companies (NBFCs), categorized as IFCs, by the Reserve Bank, are

Page 87: Shelf Prospectus

85

permitted to avail of ECBs, including the outstanding ECBs, beyond 50 per cent of their owned funds, for

on-lending to the infrastructure sector as defined under the ECB policy, subject to their complying with the

following conditions: i) compliance with the norms prescribed in the DNBS Circular DNBS.PD.CCNo.168 /

03.02.089 / 2009-10 dated February 12, 2010 ii) hedging of the currency risk in full; and (c) special purpose

vehicles, or any other entity notified by the RBI, set up to finance infrastructure companies/ projects exclusively.

The recognized lenders are as follows viz. (i) international banks, (ii) international capital markets, (iii) multilateral

financial institutions, (iv) export credit agencies, (v) suppliers’ of equipment, (vi) foreign collaborators, and (vii) foreign

equity holders (other than erstwhile overseas corporate bodies). ECB can also be raised, under the approval route, from

foreign equity holder where the minimum paid up equity held directly by the foreign equity lender is 25 per cent but

ECBs: equity ratio exceeds 4:1 (i.e. the amount of the proposed ECB exceeds four times the direct foreign equity

holding).

E. LEGISLATIVE FRAMEWORK FOR RECOVERY OF DEBTS

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

(“Securitisation Act”) provides the powers of “seize and desist” to banks and grants certain special rights to banks and

financial institutions to enforce their security interests. The Securitisation Act provides that a “secured creditor” may, in

respect of loans classified as non-performing in accordance with RBI guidelines, give notice in writing to the borrower

requiring it to discharge its liabilities within 60 days, failing which the secured creditor may take possession of the

assets constituting the security for the loan, and exercise management rights in relation thereto, including the right to

sell or otherwise dispose of the assets.

Under the Securitisation Act, all mortgages and charges on immovable properties in favour of banks and financial

institutions are enforceable without intervention of the courts. The Securitisation Act also provides for the establishment

of asset reconstruction companies regulated by RBI to acquire assets from banks and financial institutions. A bank or

financial institution may sell a standard asset only if the borrower has a consortium or multiple banking arrangements,

at least 75% by value of the total loans to the borrower are classified as non-performing and at least 75% by value of the

banks and financial institutions in the consortium or multiple banking arrangements agree to the sale. The banks or

financial institution selling financial assets should ensure that there is no known liability devolving on them and that

they do not assume any operational, legal or any other type of risks relating to the financial assets sold. Furthermore,

banks or financial institutions may not sell financial assets at a contingent price with an agreement to bear a part of the

shortfall on ultimate realisation. However, banks or financial institutions may sell specific financial assets with an

agreement to share in any surplus realised by the asset reconstruction company in the future. While each bank or

financial institution is required to make its own assessment of the value offered in the sale before accepting or rejecting

an offer for purchase of financial assets by an asset reconstruction company, in consortium or multiple banking

arrangements where more than 75% by value of the banks or financial institutions accept the offer, the remaining banks

or financial institutions are obliged to accept the offer.

Recovery of Debts Due to Banks and Financial Institutions Act, 1993

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“Debts Recovery Act”) provides for

establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of debts due to any bank or public

financial institution or to a consortium of banks and public financial institutions. Under the Debts Recovery Act, the

procedures for recoveries of debt have been simplified and time frames been fixed for speedy disposal of cases. Upon

establishment of the Debts Recovery Tribunal, no court or other authority can exercise jurisdiction in relation to matters

covered by the Debts Recovery Act, except the higher courts in India in certain circumstances.

F. LABOUR LAWS

The Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 (“the Gratuity Act”) establishes a scheme for the payment of gratuity to employees

engaged in every factory, mine, oil field, plantation, port and railway company, every shop or establishment in which

ten or more persons are employed or were employed on any day of the preceding twelve months and in such other

establishments in which ten or more persons are employed or were employed on any day of the preceding twelve

months, as the central government may, by notification, specify. Penalties are prescribed for non-compliance with

statutory provisions.

Page 88: Shelf Prospectus

86

Under the Gratuity Act, an employee who has been in continuous service for a period of five years will be eligible for

gratuity upon his retirement, resignation, superannuation, death or disablement due to accident or disease. However, the

entitlement to gratuity in the event of death or disablement will not be contingent upon an employee having completed

five years of continuous service. The maximum amount of gratuity payable may not exceed ` 0.35 million.

Employees Provident Fund and Miscellaneous Provisions Act, 1952

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (“EPF Act”) provides for the institution of

compulsory provident fund, pension fund and deposit linked insurance funds for the benefit of employees in factories

and other establishments. A liability is placed both on the employer and the employee to make certain contributions to

the funds mentioned above.

Shops and Establishments legislations in various states

The provisions of various Shops and Establishments legislations, as applicable, regulate the conditions of work and

employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia

registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures

and wages for overtime work.

The Minimum Wages Act, 1948

It provides for minimum wages in certain employments. The Central and the State Governments stipulate minimum

wages, calculated based on the basic requirement of food, clothing and housing required by an average Indian adult.

The Industrial Disputes Act, 1947

It provides the procedure for investigation and settlement of industrial disputes. When a dispute exists or is

apprehended, the appropriate Government may refer the dispute to a labour court, tribunal or arbitrator, to prevent the

occurrence or continuance of the dispute, or a strike or lock-out while a proceeding is pending. The labour courts and

tribunals may grant appropriate relief including ordering modification of contracts of employment or reinstatement of

workmen. The Industrial Disputes (Amendment) Bill 2010 passed by the Rajya Sabha on August 3, 2010, proposes to,

among other things, provide direct access for workmen to labour courts or tribunals in case of individual disputes,

expand the scope of qualifications of presiding officers of labour courts or tribunals, constitute grievance settlement

machineries in any establishment having 20 or more workmen.

G. TAX LAWS

Income Tax Act, 1961

Income Tax Act, 1961 is applicable to every Domestic /Foreign Company whose income is taxable under the provisions

of this Act or Rules made there under depending upon its “Residential Status” and “Type of Income” involved.

Value Added Tax, 2005

Value Added Tax (VAT) is charged by laws enacted by each State on sale of goods affected in the relevant States. VAT

is a multi-point levy on each of the entities in the supply chain with the facility of set-off of input tax that is the tax paid

at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value

addition in the hands of each of the entities is subject to tax. VAT is not chargeable on the value of services which do

not involve a transfer of goods. Periodical returns are required to be filed with the VAT Department of the respective

States by the Company.

Central Sales Tax Act, 1956

In accordance with the Central Sales Tax Act, every dealer registered under the Act shall be required to furnish a return

in Form I (monthly/ quarterly/ annually) as required by the State Sale Tax laws of the assessing authority together with

treasury challan or bank receipt in token of the payment of taxes due.

Service Tax

Service tax is charged on taxable services as defined in Chapter V of Finance Act, 1994, which requires a service

provider of taxable services to collect service tax from a service recipient and pay such tax to the Government.

H. LAWS RELATING TO INTELLECTUAL PROPERTY

Page 89: Shelf Prospectus

87

In India, trademarks enjoy protection both statutory and under common law. The Trademarks Act, 1999 (“Trademarks

Act”) and the Copyright Act, 1957 amongst others govern the law in relation to intellectual property, including brand

names, trade names and service marks and research works. The Trademark Act governs the statutory protection of

trademarks in India. The Trademarks Act governs the registration, acquisition, transfer and infringement of trademarks

and remedies available to a registered proprietor or user of a trademark. The registration of a trademark is valid for a

period of 10 years, and can be renewed in accordance with the specified procedure.

I. OTHER GOVERNMENT INITIATIVES APPLICABLE TO OUR COMPANY

Restructured Accelerated Power Development and Reform Programme (“R-APDRP”)

The GoI introduced the Accelerated Power Development Program ("APDP") in fiscal 2001 as part of the reform of the

Indian power sector. During the 10th Plan, the GoI subsequently upgraded the APDP program to the Accelerated Power

Development Reform Program ("APDRP") in fiscal 2003. In July 2008, APDRP was restructured and the MoP

launched the Restructured Accelerated Power Development and Reforms Program ("R-APDRP")

The R-APDRP is a GoI initiative launched for implementation during the XI five-year plan. The focus of the

programme is the actual demonstrable performance in terms of sustained loss reduction, establishment of reliable and

automated systems for collection of accurate and reliable baseline data, and adoption of information technology (“IT”)

in the areas of energy accounting and implementation of regular distribution strengthening project. The programme

envisaged objective performance evaluation of utilities in terms of aggregated technical and commercial losses

("AT&C") losses.

Our Company was designated as the nodal agency for operationalising and implementing the R-APDRP under the

overall guidance of MoP, GoI, pursuant to MoP Order dated August 6, 2008. Our Company acts as a single window

service and co-ordinates with the main stakeholders involved such as MoP, GoI, APDRP steering committee, CEA,

financial institutions, utilities and various consultants. The funds under R-APDRP are provided to the state power

utilities/ distribution companies, through our Company.

The R-APDRP proposes to cover urban areas – towns and cities with a population of more than 30,000 (10,000 in case

of special category states comprised of all North East States, Sikkim, Uttarakhand, Himachal Pradesh and Jammu and

Kashmir). Additionally, in certain high-load density rural areas, separation of agricultural feeders from domestic and

industrial feeders and separation of high voltage distribution system (“HVDS”) (11kV) will be conducted.

Projects under R-APDRP will be taken up in two parts, i.e., Part A and Part B. Part A will cover projects for

establishment of baseline data and IT applications for energy accounting/ auditing and consumer services which inter-

alia include geographic information system mapping, metering of distribution transformers and feeders, and automatic

data logging for all distribution transformers and feeders and supervisory control and data acquisition, asset mapping of

the entire distribution network at and below the 11kV transformers, management information system, redressal of

consumer grievance, and establishment of IT enabled consumer service centers etc. Establishment of supervisory

control and data acquisition ("SCADA") systems is also envisaged under Part-A of the scheme for towns having

population greater than 400,000 as per 2001 census and also having annual energy input greater than 350 million units.

Further, the base line data and required system shall be verified by third party independent evaluating agencies

(“TPIEA”) appointed by the MoP. Part B will cover system improvement, regular distribution strengthening projects

and augmentation which inter-alia includes renovation, modernization and strengthening of 11 kV level substations,

transformers/ transformer centers, load bifurcation, feeder separation, load balancing, HVDS (11kV), and aerial

bunched conductoring in dense areas.

In order to ascertain the eligibility criteria for assistance under R-APDRP, the States/ utilities are required to sign a

quadripartite agreement and commit the following:

(a) Constitute the State Electricity Regulatory Commission;

(b) Commit a time frame for introduction of measures for better accountability at all levels in the project area;

(c) Achieve the below mentioned target of AT&C loss reduction at the entire utility level every year starting one

year after the year in which first project of Part A is completed:

(i) Utilities having AT&C loss above 30% are to reduce AT&C losses by 3% per year; and

(ii) Utilities having AT&C loss below 30% are to reduce AT&C losses by 1.5% per year.

(d) Devise a suitable incentive scheme for staff linking to achievements of 15% AT&C loss in the project area;

Page 90: Shelf Prospectus

88

(e) Initially, the utilities need to provide data for three billing cycles to establish baseline data which would then

be considered for conversion of loan into grant;

(f) The following are prerequisites to compute initial loss levels and start Part B schemes:

(i) all input points to be identified and metered with downloadable meters for energy inflow accounting in

scheme area;

(ii) all outgoing feeders to be metered in substation with downloadable meters;

(iii) scheme area to be ring fenced i.e., export and import meters for energy accounting to be ensured; and

(iv) arrangement to be for measuring total energy flow in the rural load portion of the project area by ring

fencing, if the rural load feeder is not segregated.

(g) Subsequently, the utilities are to submit the previous year’s (as of March 31) AT&C loss figures of the

identified project area as verified by an independent agency appointed by MoP, and our Company by June 30

annually.

Utilities shall prepare detailed project reports (“DPRs”) in two parts i.e., Part A and Part B, for each project area

and forwarding the DPRs to our Company indicating the order of priority of the projects. Utilities may appoint IT

consultants through bidding from an open bidding process from the panel of IT and SCADA/ DMS consultants

prepared by our Company for preparing DPRs of Part A projects and for handholding utilities from concept to

commissioning of these projects. These DPRs will be validated and appraised techno-commercially by our

Company and will then be submitted to the APDRP Steering Committee for approval. Similarly, IT implementing

agencies and SCADA implementation agencies/ SCADA implementation agencies shall be empanelled agencies by

our Company and MoP after observing codal formalities. Utilities shall appoint IT implementing agencies/ SCADA

implementing agencies from the panel through bidding process for turnkey implementation of respective IT/

SCADA projects. Further, the MoP shall appoint third party independent evaluation agencies-energy accounting

("TPIEA-EA") through our Company for verifying base figure of AT&C loss of the project area, establishment of

base line data system, and annual AT&C loss figures of project areas and state power utilities/ distribution

companies. Similarly, our Company / MoP shall appoint TPIEA-IT for verification of implementation of Part A IT

and SCADA projects.

The GoI loan is granted and disbursed through our Company in line with its disbursement policy. The funding

mechanism is as follows:

Initially, GoI will provide 100% loan for approved projects under Part-A of the scheme including information

technology applications on terms decided by the MoF. The loan along with the accrued interest shall be converted

into a grant after establishment of the required baseline data system and verification by a TPIEA. The aforesaid

system is to be achieved within a period of 3 years from the date of the sanctioning of the project, failing which the

concerned utility will have to bear the loan and interest repayment.

Further, GoI will provide 25% for approved projects under Part-B of the scheme (90% for special category states),

the balance loan shall be raised from financial institutions namely our Company, Rural Electrification Corporation

Limited, multi-lateral institutions and/ or own resources, the terms of which shall be of the financial institutions. Up

to 50% (90% for special category states) of the loan provided shall be converted into a grant progressively on

achievement of AT&C loss reduction targets. Such conversion shall take place annually based on the AT&C loss

figures of the project area as on March 31, verified by the TPIEA.

Ultra Mega Power Projects (“UMPPs”)

The development of UMPPs has been identified as a thrust area by the MoP. The UMPPs have a contracted

capacity of 3,500 MW or more. These projects are proposed to meet the power needs of a number of States /

distribution companies and are being developed on a Build, Own, and Operate (“BOO”) basis. The identification of

the project developer for these projects is being done through and international competitive bidding process under

"Guidelines for determination of tariff by bidding process for procurement of power by distribution licensees",

issued by MoP.

Some of the salient features of an UMPP are as follows:

(i) use of super critical technology with a view to achieve high levels of fuel efficiency resulting in saving of fuel

and lower green-house gas emissions;

Page 91: Shelf Prospectus

89

(ii) flexibility in unit size subject to adoption of specified minimum supercritical parameters; and

(iii) integrated power project with dedicated captive coal blocks for pithead projects;

Our Company has been identified as the nodal agency by the MoP, for implementation of this initiative under

which our Company sets up special purpose vehicles (“SPVs”), in form of its wholly owned subsidiaries, to act as

authorised representatives of the procurers (distribution companies of the power procuring states). Such SPVs

undertakes, amongst others, the following key activities:

• Preparation of project report, preparation of rapid environment impact assessment report;

• Undertaking international competitive bidding, document preparation and evaluation;

• Acquisition of land for the project;

• Obtaining coal blocks for pit-head projects;

• Getting clearance regarding allocation of water by the State governments for pithead locations;

• Approval for use of sea water from Maritime Board/ other government agencies for coastal locations;

• Obtain clearance from the State Pollution Control Board, initiate forest clearance etc. as are required for the

project and for the coal mines, followed by environment and forest clearances from the Central Government;

• Tie up the off-take/ sale of power;

• Finalise request for qualification (“RFQ”)/ request for proposals (“RFP”) documents in consultation with

States / bidders; and

• Carry out RFQ/ RFP process and award of project pursuant to which such SPV are transferred to successful

bidders.

For selection of a developer for the UMPPs, a two stage selection process has been adopted as per the provisions of

the competitive bidding guidelines. The first stage of bidding involves the RFQ containing qualifying criteria for

selection of bidders. The response to RFQ documents, submitted by the bidders are evaluated to identify those

bidders who will be eligible to participate in the second stage of the process. The second stage of the bidding

process involves RFP, wherein bids are invited from the bidders so qualified. After evaluation of the bids received

from the bidders, the successful bidder is identified on the basis of the lowest levellised tariff.

For details pertaining to the SPVs established under the UMPP initiative, see section titled “History and Certain

Corporate Matters” on page 91.

Independent Transmission Projects (“ITPs”)

In April 2006, the MoP initiated a tariff based competitive bidding process for ITPs, for the development of

transmission systems through private sector participation. The objective of this initiative is to develop transmission

capacities in India and to bring in the potential investors after developing such projects to a stage having

preliminary survey work, identification of route, preparation of survey report, initiation of process of land

acquisition, initiation of process of seeking forest clearance, if required, and to conduct bidding process.

PFC Consulting Limited, a wholly owned subsidiary of our Company has been nominated as a ‘bid process

coordinator’ by MoP, for the development of ITPs entrusted to PFCCL.

For further details on the SPVs under the ITP program, see section titled “History and Certain Corporate Matters”

on page 91.

Governmental Registrations & Approvals

The company has obtained the following registrations and approvals:

1. PAN No. AAACP1570H allotted by the Income Tax Department.

2. TAN No. DELP08697D allotted by the Income Tax Department.

3. Service Tax Registration for Delhi office, having registration no. AAACP1570HST001.

4. Registration under Delhi Value Added Tax for Delhi office, having registration no. 07863002828.

5. Registration under Maharashtra Value Added Tax for Mumbai office, having registration no. 27620014060V.

6. Registration under Maharashtra State Tax on Professions, Trade, Callings and Employment Act, 1975 for

Mumbai office, having registration no. 27620014060P and 99241694479P.

7. Registration under Rajasthan Value Added Tax for Rajasthan office, having registration no. 08641608994.

8. Registration under Central Sales Tax Act, 1956 for Rajasthan office, having registration no. 08641608994.

9. Registration no. PTNAN 10151CG015-0003 under Professional Tax for Chennai office.

Page 92: Shelf Prospectus

90

10. Relaxation under Employee’s Provident Funds & Miscellaneous Provisions Act, 1952 by RPFC, Delhi vide

letter no. E/DL/14037/Relaxed/318 for setting up PFC’s own PF Trust.

11. Approval of Gratuity Fund under Income Tax Act, 1961, having reference no. CIT-III/G.F./D/95-96/172.

Registration under Indian Trade Unions Act, 1926 of PFC Employees Union having reference no. No. 4153.

12. Exemption from RBI prudential norms vide reference no. DNBS.CO.ZMD-N/4984/14.16.2009/2009-2010.

13. Registration in Class 36 of the PFC logo under Trademarks Act, 1999, having Trademark No. 1758496 and

Certificate of Registration No. 934501.

14. Registration in Class 41 of the PFC logo under Trademarks Act, 1999, having Trademark No. 1758495 and

Certificate of Registration No. 934516.

15. Registration in Class 42 of the PFC logo under Trademarks Act, 1999, having Trademark No. 1758497 and

Certificate of Registration No. 936176.

16. Registration of the copyright of Company’s logo under Section 45 of the Copyright Act, 1957, having

registration no. A 649691/2003.

17. Registration to carry on the business of non-banking financial institution (NBFC) and classified as

Infrastructure Finance Company vide registration no. B-14.00004 on July 28, 2010.

Page 93: Shelf Prospectus

91

HISTORY AND CERTAIN CORPORATE MATTERS

Our Company was incorporated on July 16, 1986 under the Companies Act as a public limited company registrered

with the ROC, National Territory of Delhi and Haryana and received our certificate for commencement of business on

December 31, 1987. The GoI incorporated our Company as a financial institution in order to finance, facilitate and

promote power sector development in India with the President of India holding 100% of our equity share capital at the

time of incorporation and at present its shareholding is 73.72%. Our Company was notified as a public financial

institution under Section 4A of the Companies Act, 1956 on August 31, 1990.

For details in relation to our business activities and investments, see section “Our Business” on page 59 of this Shelf

Prospectus.

Changes in registered office

At the time of incorporation, the registered office of our Company was situated at Room No. 627, Shram Shakti

Bhawan, Rafi Marg, New Delhi 110 001, Insdia. Later on, the registered office of our Company shifted to Chandralok,

36, Janpath, New Delhi 110 001, India on March 25, 1988. Subsequently, the registered office of our Company shifted

to Urjanidhi Building, 1-Barakhamba Lane, Connaught Place, New Delhi – 110001, India on September 23, 2006 for

ensuring administrative and operational facility.

Major events

Year Event

1986 • Incorporation of our Company. 1987 • Certificate of commencement of business received. 1988 • Commencement of lending activities; and

• Evolved broad operational policies identifying priority areas for providing financial assistance and

formulated short term, medium term and long-term strategies for operations. 1989 • Provided first guarantee to M/s Mitsui and Company, Japan for payment of principal for Rupees

equivalent to Japanese Yen 27.39 billion for supplier credit made available to UPSEB for the 1,000

MW Anpara B Thermal Power Project. 1990 • Declared as a public financial institution under section 4A of Companies Act. 1991 • Conferred with a license to deal in foreign exchange in the power sector. 1992 • Project on Energy Management Consultation and Training (EMCAT) made operational with the

objective to bring about improvement in the efficiency of the energy supply component of the power

sector with the help of USAID. 1993 • First MoU with GoI in relation to operational targets and rated excellent on the basis of all round

performance. 1994 • Company declared maiden dividend to the GoI. 1996 • Started funding private power projects. 1998 • Registered as a NBFC;

• Declared a Mini Ratna (Category I); and

• Promoted PTC Limited as joint venture with NTPC and PGCIL. 1999 • Launched consultancy services in order to provide consultancy services to both state owned and

private power utilities for the power and financial sectors. 2003 • Appointed by the MoP as a nodal agency to fund the India Power Fund scheme to catalyze the

process of fresh equity investment in the power sector. 2004 • Project appraisal system certified as ISO 9001. 2005 • Entered into MoU with LIC and ten leading public sector banks for consortium financing of power

projects. 2006 • Set up five subsidiary companies for developing UMPPs; and

• Our disbursement crossed ` 100,000 million. 2007 • Incorporated two more subsidiary companies for developing UMPP and two transmission

companies.

Page 94: Shelf Prospectus

92

• Listing of our Equity Shares on the Stock Exchanges; and

• Declared a Navratna PSU on June 22, 2007. 2008 • Appointed as nodal agency for APDRP.

• Three of the SPVs namely Coastal Gujarat Power Limited (CGPL) for Mundra UMPP in Gujarat,

Sasan Power Limited (SPL) for Sasan UMPP in Madhya Pradesh and Coastal Andhra Power Limited

(CAPL) for Krishnapatnam UMPP in Andhra Pradesh were transferred to the successful bidders.

CGPL was transferred to the Tata Power Company Limited on April 22, 2007 while SPL and CAPL

were transferred to Reliance Power Limited on August 7, 2007 and January 29, 2008 respectively.

The bid process for Tilaiya UMPP in Jharkhand has been won by Reliance Power Ltd and was

transferred to the same on February 12, 2009; and

• Further, PFC Consulting Limited was formed for undertaking consultancy assignment under power

sector. 2009 • Tilaiya UMPP awarded to Reliance Power.

• Jharkhand Integrated Power Limited SPV/subsidiary established for Tilaiya UMPP in Jharkhand

transferred to the successful bidder.

• PFCCL appointed as the bid process coordinator for ITPs

• Launch of R-APDRP website; and

• PFC in the list of Top 500 Global Financial Brands 2009.

2010 • ISO 9001:2008 Certification.

• Status of NBFC-ND-IFC from RBI in July 2010; and

• Received Heavy Weight Navaratna Award & Fastest Growing Navaratna.

2011 • Public issue of long term infrastructure bonds u/s 80CCF of Income Tax Act, 1961; and

• Further Public Offer (FPO) of our Company.

Awards and Recognitions

PFC has been entering into Memorandum of Understanding (MoU) with Government of India since 1993-94 and has been

consistently rated in the highest category of “Excellent” since then (rated ‘Very Good’ in 2004-05). After that PFC has been

rated among the ‘Top 10’ PSUs for the years 1998-99, 1999-2000, 2001-2002, 2002-2003 and 2003-2004. PFC was

conferred with the ‘Mini Ratna’ (category – I) status in the year 1998. Followed by this, the Corporation was accorded the

covetous status of ‘Navratna’ in 2007 to facilitate enhanced operational autonomy. Further, all the three divisions namely,

Projects, Finance and ID&A are ‘ISO 9001: 2000’ certified.

PFC has received the following awards in the recent past:

• “Gentle Giant”, the Largest Navratna (Non-Manufacturing)” award at the 3rd DSIJ PSU Awards on April 21,

2011 by DSIJ;

• “SCOPE Commendation Certificate” in the category of “Best Managed Bank, Financial Institution or Insurance

Company” for the year 2009-2010 during the public sector day ceremony on April 11, 2011;

• “Global HR Excellence Award” in the category of “Institution Building Award” during the World HR Congress

2011 on February 11, 2011;

• “Heavy Weight Navaratna Award” (Non Manufacturing) and the “Fastest Growing among Navaratna” during the

2nd PSU Awards 2010;

• “3rd KPMG- Infrastructure Today Award 2010” in the category of “Most Admired Central Entity in power

Sector”;

• “India Power Award 2010” for the “Integrated Development of Power and Associated Sector” organized by

Council of Power Utilities on November 11, 2010;

• “ICT for India Award” for excellence in performance for R-APDRP during the “Digital Inclusion Day” organized

jointly by SKOCH Consultancy and Department of Information and Technology, Government of India, on

September 22, 2010;

• “Asia Pacific HRM award” for leading HR Practices in “Learning & Human Capital Development” during the

Asia Pacific HRM Congress at Bangalore on September 3, 2010;

Page 95: Shelf Prospectus

93

• “India’s Pride Award 2010” in the category of “Financial Catalyst of the year” organized by Dainik Bhaskar;

• Gold award for excellence in “PSU’s in Non Banking Financial Institution 2009” by India Pride awards with

DNA;

• “India Power Award 2009” in the category of “Innovative Financing” by the Council of Power Utility on

November 17, 2009;

• Dalal Street’s “First DSIJ Award 2009” in the category ‘PSU having the highest profit per employee’;

• Prestigious ‘KPMG – Infrastructure Today Award 2008” for ‘Most Admired Government Enabler – power”

Category;

• “India Power Award 2008’ for PFC’s role & association as implementation agency with ‘Distribution Upgrades &

management (DRUM)’ Programme of Government of India; and

• Ranked 2nd

on the basis of ‘Total Income’ in FIs/NBFCs/Financial Sector category in Dun & Bradstreet’s “India’s

Top 500 Companies 2007”.

Our Main Objects

Our main objects, as contained in Clause III A of our Memorandum of Association, are:

• To finance power projects, in particular thermal and hydroelectric projects;

• To finance power transmission and distribution works;

• To finance renovation and modernization of power plants aimed at improving availability and

performance of such plants;

• To finance system improvement and energy conservation schemes;

• To finance maintenance and repair of capital equipment including facilities for repair of such equipment,

training of engineers and operating and other personnel employed in generation, transmission and

distribution of power;

• To finance survey and investigation of power projects;

• To finance studies, schemes, experiments and research activities associated with various aspects of

technology in power development and supply;

• To finance promotion and development of other energy sources including alternate and renewable energy

sources;

• To promote, organize or carry on consultancy services in the related activities of the Company;

• To finance manufacturing of capital equipment required in power sector; and

• To finance and to provide assistance for those activities having a forward and backward linkage, for the

power projects, including but not limited to, such as development of coal and other mining activities for

use as a fuel in power project, development of other fuel supply arrangements for power sector,

electrification of railway lines, laying of railway lines, roads, bridges, ports and harbours, and to meet

such other enabling infrastructure facilities that may be required.

The main objects clause and the objects incidental or ancillary to the main objects of our Memorandum of Association

enable us to undertake our existing activities and the activities for which the funds are being raised through this Issue.

Page 96: Shelf Prospectus

94

Changes in our Memorandum of Association

Since our incorporation, the following changes have been made to our Memorandum of Association:

Date of Amendment Details

January 18, 1991 Amendment in Clause V of the Memorandum of Association altering the authorised capital

of our Company to increase in authorized share capital of our Company from ` 1,000 crore

comprising of 1 crore shares of ` 1,000 each to ` 2,000 crore comprising of 2 crore

shares of ` 1,000 each.

October 30, 2001 Alteration in the objects clause of the Memorandum of Association by insertion of the

following as Clause 10 and 11 immediately after existing Clause 9. The clauses read as

follows:

10. To finance manufacturing of capital equipment required in power sector.

11. To finance and to provide assistance for those activities having a forward and backward

linkage, for the power projects, including but not limited to, such as development of coal

and other mining activities for use as a fuel in power project, development of other fuel

supply arrangements for power sector, electrification of railway lines, laying of railway

lines, roads, bridges, ports and harbours and to meet such other enabling infrastructure

facilities that may be required.

September 26, 2002 Amendment in Clause V of the Memorandum of Association altering the authorised capital

of our Company to ` 2,000 crore divided into 2,000,000,000 shares of ` 10 each on account

of splitting of equity shares of ` 1,000 each to ` 10 each.

September 13, 2006 Amendment in Clause 3 of the objects incidental or ancillary to the attainment of the main

objects clause. The words “with the previous consent of the President of India” were

deleted in the clause and the amended clause reads as follows:

To borrow, for purposes of the Company, foreign currency or to obtain foreign lines of

credit including commercial loans from any bank or financial institution or

Government/Authority in India or abroad.

Holding Company

We do not have a holding company.

Our Subsidiaries

As on date of this Shelf Prospectus, our Company has eleven Subsidiaries, the details of which are as follows:

A. PFC Capital Advisory Services Limited (“PFCCASL”)

PFCCASL is a wholly owned subsidiary of our Company. PFCCASL was incorporated on July 18, 2011 under the

Companies Act, 1956 with an authorized share capital of ` 1crore divided into 10,00,000 equity shares of ` 10 each.

The registered office of PFCCASL is located at "Urjanidhi", 1, Barakhamba Lane, Connaught Place, New Delhi 110

001, India. It is engaged in the business to syndicate and make financial arrangements for the Projects/enterprises in the

areas of power, energy, infrastructure and other industries.

B. PFC Green Energy Limited (“PFCGEL”)

PFCGEL is a wholly owned subsidiary of our Company. PFCGEL was incorporated on March 30, 2011 under the

Companies Act, 1956 with an authorized share capital of ` 12,000,000,000 divided into 1,000,000,000 equity shares of

` 10 each and 200,000,000 preference shares of ` 10 each. The registered office of PFCGEL is located at "Urjanidhi",

1, Barakhamba Lane, Connaught Place, New Delhi 110 001, India. The name of the Company was changed from Power

Finance Corporation Green Energy Limited to PFC Green Energy Limited, by a special resolution passed in terms of

Section 21 of the Companies Act, 1956 and a fresh certificate of incorporation, consequent upon change of name of

Company, was issued on July 21, 2011. PFCGEL has been incorporated to focus on financing renewable energy

projects. As on date of this Draft Shelf Prospectus, our Company (including its nominees) holds 100% of the issued and

paid up equity capital of PFCGEL.

Page 97: Shelf Prospectus

95

C. PFC Consulting Limited (“PFCCL”)

PFCCL is a wholly owned subsidiary of our Company. PFCCL was incorporated on March 25, 2008 under the

Companies Act with an authorized share capital of ` 500,000 each divided into 50,000 equity shares of `10 each. The

registered office of PFCCL is located at First Floor, "Urjanidhi", 1, Barakhamba Lane, Connaught Place, New Delhi

110 001, India. PFCCL has been incorporated to carry on, promote and organize consultancy services related to the

power sector. Presently, the consultancy services being undertaken by PFCCL comprise of assignments from State

Power Utilities, Licensees/IPPs, State Government, PSUs and SERCs. As on date of this Shelf Prospectus, our

Company (including its nominees) holds 100% of the issued and paid up equity capital of PFCCL.

D. Subsidiaries incorporated under the programmes of Government of India

(I) Subsidiaries incorporated under the Ultra Mega Power Project Program

The GoI has appointed our Company as the nodal agency to facilitate the development and construction of potential

UMPP’s in India, i.e. mega super thermal power projects with a contracted capacity of 3,500 MW or more. So far, 16

such UMPPs have been identified, and are proposed to be located in the States of Chhattisgarh, Jharkhand, Madhya

Pradesh, Orissa, Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu.

Accordingly, 12 SPVs in the form of wholly owned subsidiaries had been incorporated to undertake preliminary site

investigation activities necessary for preparation of project information reports, and obtain applicable linkages,

clearances and approvals required for conducting a tariff based competitive bidding process for selection of developers

for the UMPP’s. All such SPVs/ subsidiaries have been incorporated under the Companies Act with an authorized share

capital of ` 500,000 each divided into 50,000 equity shares of ` 10 each. The registered office of all such SPVs/

subsidiaries is located at First Floor, "Urjanidhi", 1, Barakhamba Lane, Connaught Place, New Delhi 110 001, India.

Eventually, these SPVs are to be transferred to the successful bidder(s) selected through tariff based international

competitive bidding process.

Out of the aforesaid 12 SPVs, four SPVs namely Coastal Gujarat Power Limited for Mundra UMPP in Gujarat, Sasan

Power Limited for Sasan UMPP in Madhya Pradesh, Coastal Andhra Power Limited for Krishnapatnam UMPP in

Andhra Pradesh and Jharkhand Integrated Power Limited for Tilaiya UMPP in Jharkhand have been transferred to the

successful bidders.

The dates of incorporation of the remaining eight subsidiaries are mentioned herein below.

S. No. Name of the SPV/ Subsidiary Date of

Incorporation

1. Chhattisgarh Surguja Power Limited (formerly known as Akaltara Power

Limited)

February 10, 2006

2. Coastal Karnataka Power Limited February 10, 2006

3. Coastal Maharashtra Mega Power Limited March 1, 2006

4. Orissa Integrated Power Limited August 24, 2006

5. Coastal Tamil Nadu Power Limited January 9, 2007

6. Sakhigopal Integrated Power Company Limited May 21, 2008

7. Ghogarpalli Integrated Power Company Limited May 22, 2008

8. Tatiya Andhra Mega Power Limited April 17, 2009

Our Company, (including through its nominees), holds 100% of the issued and paid up equity share capital of the

aforesaid eight SPVs/ subsidiaries.

(II) Subsidiaries incorporated under the Independent Transmission Projects Program

The MoP, has initiated the tariff based competitive bidding process for the development of transmission systems

through private sector participation. For further details on ITPs, see sections titled “Our Business” and “Regulations

and Policies” on pages 59 and 80 respectively.

Our Subsidiary, PFCCL has been nominated by MoP as a bid process co-ordinator for selection of developers for ITP

by MoP. Consequently, 4 SPV’s were incorporated in the form of wholly owned subsidiaries, for among other things, to

undertake preliminary survey work, identification of route, preparation of survey report, initiation of process of land

acquisition, initiation of process of seeking forest clearance, as and where required and for conducting the bid process.

All such SPVs/ subsidiaries were been incorporated under the Companies Act with an authorized share capital of `

Page 98: Shelf Prospectus

96

500,000 each divided into 50,000 equity shares of ` 10 each. The registered office of all such SPVs/ subsidiaries was

located at First Floor, “Urjanidhi”, 1, Barakhamba Lane, Connaught Place, New Delhi - 110 001, India.

One Such SPV/subsidiary namely Bokaro-Kodarma Maithon Transmission Company Limited was liquidated on

December, 2010 and another SPV namely, East North Interconnection Company Limited was transferred to the

successful bidder on March 31, 2010. Further, the remaining two SPVs, namely Jabalpur Transmission Company

Limited and Bhopal Dhule Transmission Company Limited were transferred to the successful bidder, namely Sterlite

Transmission Projects Private Limited, on March 31, 2011.

In addition to the above, PFCCL has also been appointed as bid process coordinator for transmission systems associated

with independent power producers of (a) the Nagapattinam/ Cuddalore area – Package A (Nagapattinam pooling station

– Salem 765 Kv D/c line, Salem – Madhugiri 765 Kv S/c line), and (b) the Nagapattinam/ Cuddalore area – Package C

(Madhugiri – Narendra 765 Kv D/c line, Kolhapur – Padghe 765 Kv D/c line (one circuit kilometer via Pune)). Further,

subject to approval of the Company, the board of directors of PFCCL in their meeting held on March 24, 2011,

approved the proposal for incorporation of two SPVs for facilitating development of the aforesaid transmission systems.

Out of which one such SPV has been incorporated on May 20, 2011 in the name of Nagapattinam-Madhugiri

Transmission Company Limited (NMTCL) having its registered office at First Floor, “Urjanidhi”, 1, Barakhamba Lane,

Connaught Place, New Delhi - 110 001, India. NMTCL is incorporated to plan, promote and develop an integrated and

efficient power transmission system network and to purchase and sale of power in accordance with the policies,

guidelines and objectives laid down by the Central Government from time to time. That as on date, PFCCL including

through its nominees, holds 100% of the issued and paid up equity share capital of NMCTL.

The securities of PFCGEL, PFCCL and the aforesaid SPVs/ subsidiaries incorporated under the UMPP scheme are not

listed on any stock exchange in India or overseas. Further none of such SPVs/ subsidiaries including PFCGEL and

PFCCL are either a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act,

1985,as amended, or are subject to a winding-up order.

Further, in accordance with paragraph 11 of Accounting Standard 21, the financial statements of the subsidiaries

incorporated under the UMPP are not consolidated with our Company.

Joint Ventures, Associate Companies and Investments

As on date of this Shelf Prospectus, the following are the details of our joint ventures, associate companies and

investments:

Joint Ventures

We have entered into two joint venture arrangements, pursuant to which the following joint venture companies have

been incorporated:

(A) National Power Exchange Limited (“NPEL”)

On September 3, 2008, our Company entered into a joint venture agreement with National Thermal Power Corporation

Limited (“NTPC”), NHPC Limited (“NHPC”) and Tata Consultancy Services Limited (“TCS”) for incorporation of

NPEL (“NPEL JVA”) to operate a power exchange at a national level and to facilitate, promote, assist, regulate and

manage dealings in power. Consequently, NPEL was incorporated as a public limited company under the Companies

Act, on December 11, 2008, with an authorized capital of ` 500,000,000. The registered office of NPEL is located at

Scope Complex, 7, Institutional Area, Lodhi Road, New Delhi – 110 003, India. As on March 31, 2011, our Company

holds 833,000 equity shares aggregating to 16.66% of the total issued and paid up equity capital of NPEL.

The key terms of the NPEL JVA are set forth below:

Share capital and subscription: In case the authorized share capital of NPEL is increased beyond ` 500,000,000, all

parties to the NPEL JVA including our Company will not be under an obligation to subscribe to such increased

authorized capital. Subscription to such increased authorized share capital shall be done through a supplemental

agreement which will form part of the NPEL JVA. The equity shareholding of NPEL shall at all times be as follows:

1. 50% of the paid up share capital of NPEL shall always be held by government entities including NTPC, NHPC

and our Company.

2. The remaining 50% of the paid up share capital of NPEL shall be held by non-government entities/ private

Page 99: Shelf Prospectus

97

entities including TCS.

However, no shareholder, at any point of time, will hold more than 25% of the paid-up share capital of NPEL.

Board of directors: The total strength of the board of directors is required to be between 3 and 15 directors. As long as

our Company holds at least 10% of the paid-up equity share capital of NPEL, our Company will have the right to

nominate a non-executive director on the board of directors of NPEL and shall also determine the period for which such

director will hold office. We currently have one nominee director on the Board of NPEL.

Reserved matters: Except with the affirmative vote of the majority of directors, including the affirmative vote of at least

one director nominated by each party to the NPEL JVA, neither can the board of directors of NPEL, a committee

thereof, its chief executive officer, nor can any other person acting on behalf of NPEL take any action with respect to

among other things the following matters:

(a) The annual revenue budget of NPEL;

(b) Winding up of NPEL;

(c) Any matter relating to the transfer, sale, lease, exchange, mortgage and/or disposal otherwise of the whole or

substantially the whole, of the undertaking of NPEL or part thereof;

(d) Increase or alter the authorized or issued share capital of NPEL;

(e) Change in the name of NPEL;

(f) Entering into any profit sharing, or any share option or other similar schemes for the benefit of the officers and

other employees of NPEL; and

(g) Any matter relating to the promotion of new company(ies) including formation of subsidiary company(ies),

entering into partnership and/or arrangement of sharing profits, taking or otherwise acquiring and holding

shares in any other company.

Non-compete: NPEL shall not compete with the business activities of any other party, without the prior consent of the

concerned party. No party shall, either directly or indirectly, compete with the business activities of NPEL, without the

prior written consent of all other parties. Further, no party shall, either directly or indirectly, subscribe to such number

of shares of any organization/ entity, competing with the business of NPEL, which shall entitle such party to exercise

control over such organization/ entity. Moreover, in such an eventuality, the relevant party shall relinquish its rights to

nominate director on the board of NPEL.

Further, our Company and TCS shall not be trading members of the power exchange to be set up by NPEL.

Transfer of shares: Unless otherwise mutually agreed, none of the parties will transfer or otherwise encumber its

shareholding in NPEL for a period of five years (“Lock in Period”) from the date of commencement of trading

operations on power exchange or the date when NPEL issues shares to the public at large through an initial public

offering, whichever is earlier. After the Lock-in Period, if any party intends to transfer any equity shares to a third party,

the selling party shall first offer such equity shares to other parties in proportion to their shareholding, at book or fair

value, whichever is higher. If the non-selling parties do not accept the offer, the selling party will be entitled to transfer

the offered equity shares to the proposed transferee on terms no more favourable and at a price not higher than that

offered to the non-selling party.

Termination of rights: If any party ceases to hold at least 10% of the paid-up share capital of NPEL, all rights of such

party under the agreement will terminate. In the event of any promoter ceases to be a promoter by mutual consent, the

non exiting parties will have an obligation to purchase and/or to name a purchaser of all the shares and any financial

interest of the exiting party, at a fair value determined by an independent chartered accountant. In the event of

termination of the NPEL JVA due to breach by any party, the defaulting party shall offer the shares held by it to the

non-defaulting parties in proportion to their respective shareholdings at a price equivalent to 80% of the fair value of

such shares.

(B) Energy Efficiency Services Limited (“EESL”)

We have entered into a joint venture agreement with National Thermal Power Corporation (“NTPC”), Power Grid

Corporation of India Limited (“PGCIL”) and Rural Electrification Corporation Limited (“REC”) on November 19,

2009 for incorporation of Energy Efficiency Services Limited (the “EESL JVA”) as an implementation arm of the

National Mission of Enhanced Energy Efficiency, which is a part of the National Action Plan on Climate Change.

EESL was incorporated as a public limited company on December 10, 2009 under the Companies Act with the

registered office located at 4th

Floor, Sewa Bhawan, R. K. Puram, New Delhi - 110066. EESL is authorized to engage in

Page 100: Shelf Prospectus

98

the business of carrying on and promoting the implementation of energy efficiency projects in India and abroad. The

authorized share capital of EESL is ` 1,900,000,000 divided into 190,000,000 equity shares of ` 10 each and the paid

up share capital of EESL is ` 25,000,000 million (divided into 2,500,000 equity shares of ` 10 each). As on March 31,

2011 our Company holds 625,000 equity shares in EESL, aggregating to 25% of the total issued and paid up share

capital of the EESL

The key terms of the EESL JVA are set forth below:

Share capital and subscription: We are required to maintain our shareholding in EESL by subscribing to any future

issue of equity shares of EESL, in proportion to our current share holding. However, no shareholder, at any point of

time, can hold more than 40% of the paid-up equity share capital of EESL. In the event of non-subscription of equity by

any of the parties to EESL JVA, the share capital contribution of such non-subscribing party will be paid by the

remaining parties in proportion to their then existing shareholding.

Board of directors: The total strength of the board of directors is required to be between 4 and 15 directors. As long as

any shareholder holds at least 10% of the paid-up equity share capital of EESL, such shareholder will have the right to

nominate a director on the board of directors of EESL and shall also determine the period for which its respective

nominees will hold office. Nomination of the non-executive chairman, to be appointed for a period of two years, is

required be rotated amongst our Company, NTPC, PGCIL and REC with NTPC nominating the first chairman. Further,

the MoP will have the right to nominate two part-time directors on the board of EESL. Currently, we have one nominee

director on the Board of EESL.

Reserved matters: Except with the affirmative vote of the majority of directors including the affirmative vote of at least

one director nominated by each party to the EESL JVA, neither can the board of directors of EESL, a committee

thereof, its chief executive officer, nor can any other person acting on behalf of EESL, take any action with respect to

among other things the following matters:

(a) The annual revenue budget of EESL;

(b) Winding up of EESL;

(c) Any matter relating to the transfer, sale, lease, exchange, mortgage and/or disposal otherwise of the whole or

substantially the whole, of the undertaking of EESL or part thereof;

(d) Increase or alter the authorized or issued share capital of EESL;

(e) Induction of new investors;

(f) Change in the name of EESL;

(g) Entering into any profit sharing, or any share option or other similar schemes for the benefit of the officers and

other employees of EESL; and

(h) Any matter relating to the promotion of new company(ies) including formation of subsidiary company(ies),

entering into partnership and/or arrangement of sharing profits, taking or otherwise acquiring and holding

shares in any other company.

Transfer of shares: Unless otherwise mutually agreed, none of the parties will transfer or otherwise encumber its

shareholding in EESL for a period of five years from the date of incorporation. After the lock-in period if any party

intends to transfer any equity shares to a third party, the selling party is required to first offer such equity shares to the

remaining parties in proportion to their shareholding, at book or fair value, whichever is higher. If the non-selling

parties do not accept the offer, the selling party will be entitled to transfer the offered equity shares to the proposed

transferee on terms no more favourable and at no higher price than those offered to the non-selling party.

Termination of rights: If any party ceases to hold at least 10% of the paid-up share capital of EESL, all rights of such

party under the agreement will terminate. In the event of termination of the EESL JVA by mutual consent, the non

exiting parties will have an obligation to purchase and/or to name a purchaser of all the shares and any financial interest

of the exiting party, at a fair value determined by an independent chartered accountant. In the event of termination of

the EESL JVA due to breach by any party, the defaulting party shall offer the shares held by it to the non-defaulting

parties in proportion to their respective shareholdings at a price equivalent to 80% of the fair value of such shares

Competition: EESL will not take up any renovation and modernization business in power plants in India and the

SAARC countries.

Associate Companies

Power Equity Capital Advisors Private Limited (“PECAP”)

Page 101: Shelf Prospectus

99

PECAP was incorporated on March 25, 2008 under the Companies Act to provide advisory services pertaining to equity

investments in the Indian power sector. Our Company holds 15,000 equity shares in PECAP aggregating to 30% of the

total issued and paid up equity share capital of PECAP. The registered office of PECAP is situated at First Floor,

"Urjanidhi", 1, Barakhamba Lane, Connaught Place, New Delhi, 110 001, India.

The key rights of our Company in PECAP, as set out in the articles of association of PECAP, are set forth below:

Share capital and subscription: In case of fresh issuance of shares, the board of directors of PECAP shall have the

power to issue such shares either to the existing shareholders in proportion to their existing shareholding or to new

shareholders at a price decided by three-fourth majority of the board of directors. Further, at present our Company is not

permitted to hold more than 30% of the paid-up share capital of PECAP.

Transfer of shares: No party can sell, transfer, assign, hypothecate, mortgage or other wise encumber its shareholdings

in PECAP without the consent of the board of directors. Transfer of shares between parties and its affiliates is

permissible with the approval of the board of directors of PECAP.

Reserved matters: Except with the consent of our Company, the board of directors of PECAP can not take any action

with respect to among other things the following matters:

(a) annual revenue budget of PECAP;

(b) any matter relating to the sale, lease, exchange, mortgage and/ or disposal otherwise of the whole or substantially

whole of the undertaking of PECAP of part thereof;

(c) the arrangements involving foreign collaboration proposed to be entered into by PECAP;

(d) any matter relating to (i) promotion of new company/company (ies) (ii) entering into partnership and/or

arrangement of sharing profits (iii) formation of subsidiary company (ies) and (iv) taking or otherwise acquiring

and holding shares in any other company;

(e) Appointment of persons (i) to any post upto two levels below the level of director on the board of directors (ii) who

have attained the age of 60 years; and

(f) Any other matter in the opinion of the chairman to be of such importance as to be reserved for the approval of our

Company.

Our Company shall have the power to modify any proposal or decision of the directors pertaining to the aforesaid

matters.

Board of directors: The total strength of the board of directors is required to be between 2 and 12 directors. Our

Company has the right to nominate two directors on the board of directors. The chairman of the board of PECAP shall

always be the director nominated by our Company. Currently, we two nominee directors on the Board of PECAP.

Investments

(A) PTC India Limited (formerly known as Power Trading Corporation of India Limited) (“PTC”)

PTC was incorporated as a joint venture company on April 16, 1999, under the Companies Act, and received its

certificate of commencement of business on July 15, 1999. PTC is engaged in the business of purchasing, selling,

importing, exporting and trading all forms of electricity, power and ancillary activities.

Pursuant to a promoters’ agreement dated April 8, 1999, PTC was promoted by PGCIL, NTPC and our Company.

Consequently, through a supplementary agreement dated November 29, 2002 (together with the original agreement

referred to as (“Promoters Agreement”) NHPC also became a promoter of PTC. The key terms of the Promoters

Agreement are as follows:

Share capital and subscription: The initial authorized share capital of PTC is ` 7,500,000,000 divided into 750,000,000

equity shares of ` 10 each of which our Company is entitled to hold 8% and is also entitled to subscribe to additional

shares offered by PTC. Our Company presently holds 12,000,000 shares in PTC aggregating to 4.07% of the total

issued and paid up capital.

The Promoters Agreement is irrevocable until the entire authorised capital of PTC of ` 7,500,000,000 is fully paid-up

unless all parties mutually agree to terminate it. Further, if a party fails to subscribe to its agreed proportion then it is

liable to pay interest @ 18% p.a. for the period until the payment is made.

Page 102: Shelf Prospectus

100

Board of directors: As long as our Company holds 8% of the equity shares of PTC, our Company has the right to

nominate one part-time director on the board of directors of PTC. However despite our shareholding in PTC being

below 8%, we have one director on the Board of PTC. The chairman and managing director of PTC is required to be

appointed upon the consent of the chairman and managing director of PGCIL, NTPC, NHPC and our Company.

Currently, we have one nominee director on the Board of PTC.

Transfer of shares: No party can sell, transfer, assign, mortgage or otherwise encumber its shareholdings in PTC for

initial period of 12 years from the date of incorporation of the PTC. After the lock-in period if a party intends to transfer

any equity shares to a third party, the selling party is required to first offer such equity shares to the remaining parties in

proportion to their shareholding. If the non-selling parties do not accept the offer, the selling party will be entitled to

transfer the offered equity shares to the third party on terms no more favourable and at no higher price than those

offered to the non-selling party.

(B) Power Exchange India Limited (“PEIL”)

Power Exchange India Limited is a joint venture company promoted by National Stock Exchange Limited (“NSE”) and

National Commodity & Derivatives Exchange Limited (“NCDEX”) for setting up, operationalising and managing a

national level power exchange in India (“Power Exchange”).

For ensuring a wider representation of the power sector, in line with the regulatory intent and directions and recognising

the need for additional capital infusions, our Company was invited by NSE and NCDEX to invest in PEIL.

Consequently, our Company entered into a share subscription and shareholders agreement (“Agreement”) with NSE

and NCDEX on February 24, 2009 for subscribing to the equity shares of PEIL. Pursuant to which our Company

presently holds 1,750,000 equity shares aggregating to 4.37% of the total issued and paid up share capital of the PEIL.

The key terms of the Agreement are set forth below:

Share capital and subscription: Under the Agreement, our Company is required to maintain an equity shareholding of

7% of the total issued and paid up share capital of PEIL.

Board of directors: The total strength of the board of directors shall not exceed 12 directors. Our Company shall have

the right to nominate a director on the board only if it holds 10% or more shares in PEIL. Presently, our Company holds

less than 10% shareholding in the PEIL, and therefore our Company does not have any nominee director on the board of

PEIL.

Transfer of shares: Unless otherwise mutually agreed, none of the parties can transfer or otherwise encumber its

shareholding in PEIL for a period of three years from the date of first day of trading operation on the power exchange or

till the date PEIL undertakes an initial public offering, whichever is earlier. Neither party can, without obtaining prior

written consent of the other parties, sell or transfer all or any part of its shares in PEIL to any other person or any

shareholder. If any shareholder other than NSE and NCDEX intends to transfer any equity shares to a third party prior

to the initial public offering, such shares shall be first offered to NSE and NCDEX at the fair market value. If NSE and

NCDEX decline to purchase the offered shares, the selling party shall offer the shares to the other shareholders of PEIL

pro rata to the shares held by them to the extent of a maximum shareholding of 7% of the total issued and paid-up

capital of PEIL. Upon refusal of such shareholder the selling party is free to sell the offered shares to a third party, who

is not a competitor of PEIL.

If any time prior to initial public offering, NSE and NCDEX decide to sell their shares at a value more than the par

value of ` 10 per share, the remaining shareholders shall also be entitled to sell their shares on pro rata basis to the

shares offered, on the same terms and conditions, subject to the terms and conditions of the Agreement.

Our Company cannot in any manner or form, create any encumbrances on the shares held in PEIL during the

subsistence of the Agreement, without the prior express written consent of PEIL.

Events of default: In the event of default committed by any party as listed in the Agreement and failure to remedy such

default in the prescribed time or till reference for arbitration is made, such defaulting party will not receive any

dividend, interest or any other payment or returns on its shares.

Non-compete and exclusivity: Until the time PEIL undertakes an initial public offering, the shareholders other than NSE

and NCDEX can not directly or through any affiliate hold equity or make any other form of investment of any kind, in

the same business as that of PEIL or similar to that of a Power Exchange without prior written approval of PEIL.

Page 103: Shelf Prospectus

101

(C) Small is Beautiful Fund (“SIB Fund”)

Our Company invested in SIB Fund pursuant to contribution agreement dated March 24, 2004 (“Contribution

Agreement”) entered between KSK Trust Private Limited, KSK Energy Ventures Limited and our Company. As on

June 30, 2011 the net outstanding contribution of our Company is ` 8.73 crores aggregating to 9.74% stake in SIB Fund

of our Company. The net asset value per unit of SIB Fund as on March 31, 2011 was ` 10.08. SIB Fund is engaged in

making equity and equity related investments, amongst others, in project companies operating in the business of power

generation and other allied projects in Indian power sector with an intent to invest in power projects less than 100 MW,

based on renewable sources or for captive consumption.

Material Agreements

Memorandum of Understanding with the Ministry of Power, Government of India

We enter into an annual memorandum of understanding with the MoP (“MoP MoU”), which provides for the exercise

of enhanced autonomy by delegation of financial powers to our Company. The MoP MoU for the year 2011-2012

provides that MoP would provide required assistance in getting resolved issues requiring inter ministerial consultations

in relation to mobilization of cheaper financial resources which may include raising of tax free bonds/SLR

bonds/taxable bonds/infrastructure bonds/bonds u/s 54EC of IT Act, loans from banks/institution and ECB/Direct

World Bank/ Asian Development Bank loans.

Under the terms of MoP MoU for the year 2011 – 2012 we are among other things required to undertake the following

activities:

1. Work as a catalyst to bring institutional improvement in streamlining the functions of its borrowers in the areas of

financial, technical and managerial to ensure optimum utilization of available resources;

2. Develop ultra mega power projects, and play a lead role in setting up shell companies in the name of projects for

implementation of transmission and hydro power projects to be developed through competitive bidding route; and

3. Provide financial resources and to encourage flow of investments to power and associated sectors.

Further, our Board of Directors are required to review the performance under each target on a monthly basis and our

Board of Directors and MoP are required to review our performance under each target on a quarterly basis.

The MoP MoU 2011- 2012 is in force and operational beyond 2011-2012 until it is modified by the signing of the

subsequent memorandum of understanding with the MoP.

Memorandum of Understanding with the Nuclear Power Corporation of India Limited

Our Company has entered into a memorandum of understanding dated October 28, 2010, with the Nuclear Power

Corporation of India Limited ("NPCIL") (“NPCIL MoU”), to examine the feasibility of providing debt financing and

other services by our Company to NPCIL for setting up of nuclear power projects. Our Company may (i) facilitate loan

towards equity requirements in respect of new nuclear power projects against security of commissioned project subject

to detailed due diligence within the prevailing policy frame work; (ii) consider direct equity stake in the nuclear power

projects of NPCIL within the policy framework. Further our Company may provide consultancy services, through our

subsidiary PFC Consulting Limited, at various stages of projects undertaken by NPCIL starting with site identification

and related clearances etc.

The NPCIL MoU is valid up to March 31, 2013 unless extended by mutual consent. The parties have an option to

terminate the NPCIL MoU after giving one month notice in writing to the other party.

Further, apart from our various arrangements with our lenders, which we undertake in the ordinary course of our

business, our Company does not have any other material agreement.

Page 104: Shelf Prospectus

102

MANAGEMENT

Board of Directors

As per the Articles of Association of the Company, the number of directors of the company shall not be less than three

and more than twelve. The general superintendence, direction and management of the affairs and business of our

Company is vested in the Board of Directors who shall exercise all powers and do all acts and deeds, as the company is

authorized to exercise and do, except those which can be exercised by the company in the general meeting, as per the

Companies Act, 1956 or its Memorandum and Articles of Association.

Presently, there are ten Directors on our Board consisting of four executive directors and six non-executive directors

including one government nominee & five non-official part-time directors as independent directors, as per office order

of Government of India. The appointment, as well as terms and conditions of whole-time directors including chairman

and managing director are also approved by Government of India vide their respective office orders.

The details of Board of Directors as on the date of the Shelf Prospectus are as follows:

S

No.

Name, Father’s name, Designation, Date

of Appointment, DIN, Nationality & Age

Address Other Directorships

1. Mr. Satnam Singh

Father’s name: Mr. Daulat Ram

Designation: Chairman & Managing

Director

Date of Appointment: August 01, 2008

DIN: 00009074

Nationality: Indian

Age: 53 years

B-2/2378, Vasant

Kunj,

New Delhi 110 070,

India.

� PFC Consulting Ltd.

� PFC Green Energy Limited

� PFC Capital Advisory Services

Limited

2. Mr. Mukesh Kumar Goel

Father’s name: Mr. Madho Ram Goel

Designation: Director (Commercial) and

Whole-time director

Date of Appointment: July 27, 2007

DIN: 00239813

Nationality: Indian

Age: 54 years

278D, Pocket-2,

Mayur Vihar, Phase

1,

Delhi, 110091,

India

� PTC India Ltd.

� Orissa Integrated Power Ltd.

� Sakhigopal Integrated Power Company

Ltd.

� Ghogarpalli Integrated Power

Company Ltd.

� PFC Consulting Ltd.

� Tatiya Andhra Mega Power Ltd.

� PTC India Financial Services Ltd.

� PFC Green Energy Limited.

3. Mr. Rajeev Sharma

Father’s name: Mr. B. D. Sharma

Designation: Director (Projects) and

Whole-time Director

Date of Appointment: March 09, 2009

DIN: 00973413

Nationality: Indian

Age: 51 years

594, Pocket - E,

Mayur Vihar,

Phase II,

Delhi, 110091,

India

� Chhattisgarh Surguja Power Ltd.

� Coastal Karnataka Power Ltd.

� Energy Efficiency Services Ltd.

� PFC Green Energy Limited.

� PFC Capital Advisory Services

Limited

4. Mr. Radhakrishnan Nagrajan

Father’s name: Late Mr. S. Radhakrishnan

Designation: Director (Finance) and

Whole-time director

Date of Appointment: July 31, 2009

DIN: 00701892

Nationality: Indian

Age: 54 years

Flat No. 3C, Pocket

A - 10, Kohinoor

Apartments,,

Kalkaji Extn.,

New Delhi, 110019,

India

� Coastal Tamil Nadu Power Ltd.

� Coastal Maharashtra Mega Power Ltd.

� PFC Consulting Ltd.

� National Power Exchange Ltd.

� PFC Green Energy Limited.

� PFC Capital Advisory Services

Limited

5. Mr. Devender Singh

Father’s name: Mr. Karan Singh Panwar

E-244, Naraina

Vihar,

New Delhi, 110028,

� Rural Electrification Corporation Ltd.

� Energy Efficiency Services Ltd.

Page 105: Shelf Prospectus

103

Designation: Government Nominee

Director

Date of Appointment: March 05, 2009

DIN: 01792131

Nationality: Indian

Age: 49 years

India

6. Mr. Ravindra Harshadrai Dholakia

Father’s name: Mr. H.L. Dholakia

Designation: Independent Director

Date of Appointment: December 22, 2009

DIN: 00069396

Nationality: Indian

Age: 58 years

313, Indian Institute

of Management

(IIM), Vastrapur,

Ahmedabad,

380015, India

� The State Trading Corporation of India

Ltd.

� Mundra Port & Special Economic

Zone Ltd.

7. Mr. P. Murali Mohana Rao

Father’s name: Mr. P. Viswanatham

Designation: Independent Director

Date of Appointment: December 22, 2009

DIN: 01909611

Nationality: Indian

Age: 53 years

Plot No. 61,

Avanthi Nagar,

Basheerbagh,

Hyderabad, 500029,

India

� Nil

8. Mr. Suresh Chand Gupta

Father’s name: Late Mr. O.P. Gupta

Designation: Independent Director

Date of Appointment: February 25, 2010

DIN: 00541198

Nationality: Indian

Age: 57 years

20, Shri Ram Road,

Civil Lines,

Delhi - 110054,

India.

� UAE Exchange & Financial Services

Ltd.

� Union KBC Asset Management

Company Private Limited

9. Mr. Ajit Prasad

Father’s name: Mr. M. M. Prasad

Designation: Independent Director

Date of Appointment: October 08, 2010

DIN: 03302219

Nationality: Indian

Age: 53 years

A-640, Sarita Vihar,

New Delhi, 110044,

India

NIL

10. Mr. Krishna Mohan Sahni

Father’s name: Late Shri A.D. Sawhney

Designation: Independent Director

Date of Appointment: December 31, 2010

DIN: 02103128

Nationality: Indian

Age: 64 years

House No 38,

Pocket 2,

Jasola Vihar,

New Delhi- 110

025, India

� Omnibus Industrial Development

Corporation of Daman Diu and Dadra

Nagar Haveli Limited

� National Multi Commodity Exchange

of India Ltd.

None of our Directors are related to each other.

All our Directors are appointed by the President of India acting through the MoP, who is our major shareholder

presently holding 73.72% of the paid-up equity share capital of our Company. Besides this, there are no arrangements

or understanding with major shareholders, customers, suppliers or others, pursuant to which any of the Directors were

selected as a Director or member of the senior management.

Brief Profiles of the Directors is given below:

Mr. Satnam Singh, 53 years, is the Chairman and Managing Director of our Company since August 1, 2008. He joined

the Board as director (Finance and Financial Operations) on February 1, 2005. Mr. Singh heads our Company and

provides strategic direction and guidance to all activities of our Company. Mr. Singh joined our Company in 1996. Mr.

Singh holds a Bachelor’s degree in Commerce from Guru Nanak Dev University, Amritsar and a Master’s degree in

Business Administration from Panjab University. Mr. Singh has experience in the power and financial sectors. He was

Page 106: Shelf Prospectus

104

involved in the IPO of our Company in 2007. He was director (Finance and Financial Operations) on the Board when

our Company transitioned from a ‘Mini-Ratna’ to a ‘Navratna’ company. He was a member of the APDRP Steering

Committee constituted by the GoI. He has been nominated to be a part of a high level panel approved by the Prime

Minister of India on "Financial Position of Distribution Utilities" to suggest measures to improve the viability of the

power distribution sector. He is also the member of a High Level Committee on Financing Infrastructure constituted

under the chairmanship of Dr. Rakesh Mohan. He has been conferred with various awards namely "Power Today

Person of the Year, 2010", he was admitted as "Distinguished Fellowship" by the Institute of Directors, "Bharat

Siromani Award" for the year 2008-2009 and "CEPM – PMA Honorary Fellowship Award".

Mr. Mukesh Kumar Goel, 54 years, is the Director (Commercial) and is in-charge of commercial division. He joined

the Board on July 27, 2007. He holds a Bachelor’s degree in Technology (Electrical Engineering) from Kanpur

University. Mr. Goel has experience in the power sector of over two decades. Prior to joining our Company on

November 22, 1988, he worked with NHPC Limited. He has been involved in introducing reforms in SPUs, steering R-

APDRP of the GoI and overseeing the human resource functioning, information technology and legal activities of our

Company.

Mr. Rajeev Sharma, 51 years, is the Director (Projects) and is responsible for all functions of projects division

including technical appraisal of the projects financed by our Company. He joined the Board on March 9, 2009. He holds

a Bachelors degree in Technology (Electrical Engineering) from Govind Ballabh Pant University, Pantnagar, a Post

Graduate Diploma (Electronics and Communication Engineering) and a Masters degree in Engineering (Electrical

Engineering) from the University of Roorkee (now known as Indian Institute of Technology, Roorkee). He also holds a

Masters degree in Business Administration from University of Delhi. Even prior to joining our Company in August

2005, he has been associated with the power sector. As an executive director of our Company, he was director (in-

charge) for development of the Krishnapatnam UMPP and was responsible for implementation of R-APDRP in India. In

addition, he also looked after the southern States for project appraisal and functions of human resources and

administration of our Company.

Mr. Radhakrishnan Nagarajan, 54 years, is the Director (Finance) and is responsible for all functions of the finance

division. He joined the Board on July 31, 2009. He holds a Bachelor’s degree in Commerce from University of Madras

and is a qualified Chartered Accountant, Cost Accountant and a certified associate of the Indian Institute of Bankers.

Mr. Nagarajan has experience in the financial sector, having worked with Andhra Bank and our Company in various

positions. He joined our Company in 1994 and has been holding the post of executive director (Finance) since January

2008 during which he was overseeing various business activities relating to IPO, resource mobilization, banking,

treasury, disbursement, recovery, internal audit, power exchange, asset liability and risk management.

Mr. Devender Singh, 49 years, is a nominee Director of the GoI and is presently the joint secretary to the MoP. He

joined the Board on March 5, 2009. Mr. Singh is a 1987 batch IAS officer of the Haryana cadre. He holds a Bachelor’s

degree in Electronics and Communication from the Delhi College of Engineering, Delhi and a Master’s degree in

Business Administration from the Indian Institute of Management (“IIM”), Ahmedabad. Mr. Singh has an experience of

working in various government departments such as in the capacity of managing director of Haryana Dairy

Development Cooperative Federation Limited and Haryana State Cooperative Supply and Marketing Federation

Limited, Chandigarh and also as director of the Department of Industries and Mines, deputy commissioner of Gurgaon

and deputy commissioner of Karnal.

Mr. Ravindra Harshadrai Dholakia, 58 years, is an Independent Director. He joined the Board on December 22,

2009. Mr. Dholakia was a post Doctoral Fellow in the University of Toronto and holds a PhD degree from Maharaja

Sayajirao University of Baroda. He is a professor of Economics and Public Systems at IIM, Ahmedabad and has been

on the faculty of IIM-Ahmedabad since 1985. He has experience in teaching economics to different groups such as

students, executives, policymakers and senior government officers. He was a member of the 6th

Central Pay

Commission in India and has written several monographs, books, research papers published in journals of national and

international repute.

Mr. P. Murali Mohana Rao, 53 years, is an Independent Director. He joined the Board on December 22, 2009. Mr.

Rao holds a Bachelor's degree in Commerce from Andhra University and is a qualified Chartered Accountant. He has

been practicing for over 25 years.

Mr. Suresh Chand Gupta, 57 years, is an Independent Director. He joined the Board on February 25, 2010. Mr. Gupta

is a qualified Chartered Accountant and holds a Bachelor’s degree in Commerce from Punjab University, Chandigarh as

well as a Bachelor’s degree in Law from University of Delhi. In the past, he has held directorships in various banks and

companies. He is also a senior partner in a chartered accountancy firm.

Page 107: Shelf Prospectus

105

Mr. Ajit Prasad, 53 years, is an Independent Director. He joined the Board on October 8, 2010. He holds a Master’s

degree in Economics from University of Delhi and a Post Graduate Diploma in Management from the International

Management Institute. He also holds a Ph.D. from Patna University. He has been involved with various organizations as

an academician. His publications and research interests are in the areas of corporate planning, strategic thinking and

governance along with a focus on ethics and corporate social responsibility.

Mr. Krishna Mohan Sahni, 64 years, is an Independent Director. He joined the Board on December 31, 2010. He

holds a Bachelor’s degree in English literature and a Master’s degree in History from University of Delhi. He is a 1969

batch IAS officer of the Union Territory cadre. He has held various positions such as Secretary to the Ministry of

Labour and Employment, GoI, additional secretary to Ministry of Agriculture, GoI, principal secretary to the General

Administration Department and Tourism, Government of Delhi, principal secretary (Power), GoI, chairman and

managing director of Delhi Transco Limited and Delhi Financial Corporation, managing director of Delhi Tourism

Development Corporation Limited (now known as Delhi Tourism and Transportation Development Corporation

Limited) and Delhi State Industrial Development Corporation Limited (now known as Delhi State Industrial and

Infrastructure Development Corporation Limited).

Relationship with other Directors

None of the Directors of the company are, in any way, related to each other.

Borrowing Powers of our Directors

Subject to the Memorandum and Articles of Association of our Company, the Shareholders at its meeting held on

September 25, 2007, passed a resolution under Section 293(1)(d) of the Act, according approval to the Board of

Directors of the company, for borrowings upto a total amount of ` 1,00,000 crores (Rupees one lakh crore only) in

Indian rupees and in any foreign currency equivalent to US $ 4000 million (four thousand million US Dollars only), for

the purpose of the business of the company. The aggregate value of the Bonds offered under this Shelf Prospectus,

together with the existing borrowings of our Company, is within the approved borrowing limits of ` 1,00,000 crores

(Rupees one lakh crores only).

The Issue of Bonds offered under this Shelf Prospectus is being made pursuant to the resolution passed by the Board of

Directors at its Meeting held on March 17, 2011.

Shareholding of Directors

Sr. No. Name of Director No. of Shares

1 Mr. Satnam Singh 25,155

2 Mr. M.K. Goel 10,283

3 Mr. Rajeev Sharma 16,287

4 Mr. R. Nagarajan 25,200

5 Mr. Devender Singh* 700

*Holding Equity Shares in our Company as a nominee of our Promoter i.e. President of India acting through the MoP.

For further details of our shareholding pattern, refer to “Capital Structure” on page 42.

As per Articles of Association of the company, directors are not required to hold any qualification shares.

Details of Appointment and Term of our Directors

S.

No.

Name of Director MoP Order No. Term

1. Mr. Satnam Singh No. 8/3/2007 – PF

dated August 7, 2008*

5 years with effect from August 1, 2008 or until the date of

superannuation or until further orders, whichever event

occurs earliest.

2. Mr. Mukesh Kumar

Goel

No. 8/1/2006-PFC

dated July 27, 2007

5 years with effect from the date of taking charge of the post

or until the date of superannuation or until further orders,

whichever event occurs earliest.

Page 108: Shelf Prospectus

106

S.

No.

Name of Director MoP Order No. Term

3. Mr. Rajeev Sharma No. 8/5/2008-PF Desk

dated March 9, 2009

5 years with effect from the date of taking charge of the post

or until the date of superannuation or until further orders,

whichever event occurs earliest.

4. Mr. Radhakrishnan

Nagarajan

No. 8/1/2008 – PF

dated July 31, 2009

5 years with effect from the date of taking charge of the post

or until the date of superannuation or until further orders,

whichever event occurs earliest.

5. Mr. Devender Singh No. 1/1/2009 – Adm.II

dated March 5, 2009

With effect from March 5, 2009 and until further orders.

6. Mr. Ravindra

Harshadrai Dholakia

No. 8/1/2009 – PF

Desk dated December

22, 2009

3 years with effect from December 22, 2009 or until further

orders, whichever event occurs earliest.

7. Mr. P. Murali

Mohana Rao

No. 8/1/2009 – PF

Desk dated December

22, 2009

3 years with effect from December 22, 2009 or until further

orders, whichever event occurs earliest.

8. Mr. Suresh Chand

Gupta

No. 8/1/2009 – PF

Desk dated February

25, 2010

3 years with effect from February 25, 2010 or until further

orders, whichever event occurs earliest.

9. Mr. Ajit Prasad No. 8/1/2009 – PF

Desk dated October 8,

2010

3 years with effect from October 8, 2010 or until further

orders, whichever event occurs earliest.

10. Mr. Krishna Mohan

Sahni

No. 8/1/2009 – PF

Desk dated December

31, 2010

3 years with effect from December 31, 2010 or until further

orders, whichever event occurs earliest.

* Read with MoP Order No. 8/3/2007-PF dated June 27, 2008

Remuneration of Directors

A. Managing Director and Whole Time Directors

The following table sets forth the details of remuneration paid to the Whole Time Director during the Fiscal 2011:

(In ` crores)

Name of the

Director

Salary

Company contribution

to Provident Fund

Total

Mr. Satnam Singh 0.36 0.02 0.38

Mr. M.K. Goel 0.38 0.02 0.40

Mr. Rajeev Sharma 0.36 0.02 0.38

Mr. R. Nagarajan 0.31 0.02 0.33

B. Independent Directors

The Independent Directors do not have any material pecuniary relationship or transaction with the company. However,

they were paid sitting fee for attending the meetings of the Board of Directors and Committee of Directors, as set

forth under the following table, during the Fiscal 2011:

(In ` crores)

Name of the Independent

Director

Sitting Fees Total

Board Meetings Committee Meetings

Mr. Ravindra H. Dholakia 0.02 0.03 0.05

Mr. P. Murali Mohana Rao 0.02 0.03 0.05

Mr. S.C. Gupta 0.02 0.01 0.03

Page 109: Shelf Prospectus

107

Mr. Ajit Prasad 0.01 0.01 0.02

Mr. Krishna Mohan Sahni 0.005 0.001 0.006

Mr. Devender Singh, being a nominee of the GoI, is not entitled to remuneration or sitting fee or any other remuneration

from our Company.

Changes in our Board during the last three years

The changes in our Board in the last three years are as follows:

Name Date of Appointment Date of Cessation Particulars

Mr. Satnam Singh February 1, 2005 August 1, 2008 Nomination withdrawn by MoP

Mr. Satnam Singh August 1, 2008

Continuing Appointment

pursuant to MoP Order

Mr. Anil Kumar April 11, 2008 March 18, 2009 Nomination withdrawn by GoI

Mr. Devender Singh March 05, 2009 - Government nominee

Mr. Rajeev Sharma March 09, 2009 - Appointment

Mr. Rakesh Jain June 25, 2009 January 6, 2011 Nomination withdrawn by GoI

Mr. B.K. Mittal June 29, 2006 June 28, 2009 Cessation

Mr. G.P. Gupta June 29, 2006 June 28, 2009 Cessation

Mr. S. K. Bhargava June 29, 2006 June 28, 2009 Cessation

Mr. P.G. Apte June 29, 2006 June 28, 2009 Cessation

Mr. R. Nagarajan July 31, 2009 - Appointment

Mr. P. Murali Mohana Rao December 22, 2009 - Appointment

Mr. R.H. Dholakia December 22, 2009 - Appointment

Mr. S.C. Gupta February 25, 2010 - Appointment

Mr. Ajit Prasad October 08, 2010 - Appointment

Mr. Krishna Mohan Sahni December 31, 2010 - Appointment

Interests of our Directors

Except as otherwise stated in “Financial Statements – Related Party Transactions” our company has not entered into

any contract, agreements and arrangement during the two years preceding the date of this Shelf Prospectus in which the

directors are interested directly or indirectly and no payments have been made to them in respect of such contracts or

agreements.

All our Directors, including our independent Directors, may be deemed to be interested to the extent of fees, if any,

payable to them for attending meetings of the Board or a committee thereof, as well as to the extent of other

remuneration and reimbursement of expenses payable to them.

Our Directors, may also be regarded as interested, to the extent they, their relatives or the entities in which they are

interested as directors, members, partners or trustees, are allotted Bonds pursuant to this Issue, if any.

Corporate Governance

Our Equity Shares are listed on the Stock Exchanges and our Company has adopted corporate governance practices in

accordance with Clause 49 of the Equity Listing Agreements, entered into with the Stock Exchanges.

Our Company did not comply with certain provisions of the Equity Listing Agreements relating to composition of

board of directors for certain quarters of 2010. However, as on the date of this Shelf Prospectus, our Company is in

compliance with the requirements of Clause 49 of the Equity Listing Agreements in relation to the composition of its

board of directors. Presently, our Board has 10 directors, of which 5 are Independent Directors.

We have constituted an Audit Committee and a Shareholders’ and Investor Grievance Committee as per the

requirements of Clause 49 of the Equity Listing Agreements. Whilst the constitution of Remuneration Committee is not

mandatory under the Equity Listing Agreements, we have constituted a Remuneration Committee in accordance with

the guidelines issued by DPE which are applicable to all central public sector enterprises.

Our Board functions either as a full Board or through various committees constituted to oversee specific operational

areas.

Page 110: Shelf Prospectus

108

Committees of Board of Directors

Our Board has constituted the following committees of Directors:

i.) Audit Committee

ii.) Remuneration Committee

iii.) Shareholders’/Investors’ Grievance Committee

iv.) Loans Committee

v.) Committee of Functional Directors

vi.) Risk Management Committee

vii.) Committee of Directors for Investment in IPO of Central Power Sector Undertakings (CPSUs)

viii.) Ethics Committee

The details of these committees are set forth below:

A. Audit committee

The audit committee met 9 times during the fiscal 2011. As on date, the Audit Committee comprises of the following

members:

1. Mr. P. Murali Mohana Rao Chairman

2. Mr. Ravindra H. Dholakia Member

3. Mr. Rajeev Sharma Member

4. Mr. Ajit Prasad Member

Scope and terms of reference

The role and terms of reference of Audit Committee is in line with the requirements of Clause 49 of the Listing

Agreement read with Section 292A of the Companies Act, 1956. The terms of reference of the Audit Committee

includes the following:

• To investigate any activity within its terms of reference.

• To seek information from any employee.

• To obtain legal or other professional advice.

• To secure attendance of outsiders with relevant expertise, if it is considered necessary.

• Oversight of the company’s financial reporting process and disclosure of its financial information to ensure that the

financial statement is correct, sufficient and creditable.

• Recommending the appointment and removal of external auditors, fixation of audit fee and also approval for

payment for any other services.

• Reviewing with management the annual financial statement before submission to the Board, focusing primarily on

:-

� Any change in accounting policy and practices.

� Major accounting entries based on exercise of judgment by the management.

� Qualification in draft audit report.

� Significant adjustment arising out of audit.

� Compliance with accounting standard.

� Compliance with Stock Exchange and Legal requirement concerning financial statement.

� Any related party transaction i.e. transaction of the Company of material nature, with promoters or the

management, their subsidiary or relatives etc. that may have potential conflict with the interest of the company

at large.

� Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report

in terms of clause (2AA) of section 217 of the Companies Act, 1956

• Reviewing with management, external and internal auditor, the adequacy of internal control system and suggestion

Page 111: Shelf Prospectus

109

for implementation for the same.

• Reviewing the adequacy of internal audit function including the structure of internal audit department, staffing and

seniority of the officials heading the departments, reporting structure coverage and frequency of internal audit.

• Discussion with internal auditor and significant finding and follow up thereon.

• Reviewing the findings of any internal investigation by the internal auditors into matters where there is suspected

fraud or irregularity or a failure of internal control system of a material nature and reporting the matters to the

Board.

• Discussion with external auditor before the audit commences, and nature of scope of audit as well as post audit

discussion to ascertain any area of concern.

• Reviewing the companies financial and risk management policy.

• To look into the reasons for substantial default in the payment to the depositors, debentures holders, shareholders

and creditors.

• It shall have discussion with auditors periodically about internal control system, the scope of audit including the

observation of the auditors & review the quarterly, half yearly & annual financial statement before submission to

the Board, it shall ensure compliance of internal control system.

• Approval of payment to statutory auditors for any other services rendered by statutory auditors.

• Reviewing the Management discussion and analysis of financial condition and results of operations.

• Formulation of Whistle Blower Policy and recommending the same to Board for approval and review the

functioning of the Whistle Blower Mechanism and also to protect the Whistle Blowers.

• Reviewing the follow up action on the audit observation of the C&AG audit.

• Reviewing the follow up action taken on the recommendations of Committee on Public Undertakings (COPU) of

the Parliament.

• Reviewing, with the management, the statement of uses/application of funds raised through an issue (public issue,

rights issue, preferential issue etc.), the statement of funds utilized for purposes other than those stated in the offer

document/prospectus/notice and the report submitted by the monitoring agency monitoring the utilization of

proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this

matter.

B. Remuneration Committee

The remuneration committee met 6 times during the fiscal 2011. As on date, the Remuneration Committee comprises of

the following members:

Mr. Ravindra H. Dholakia Chairman

Mr. P. Murali Mohana Rao Member

Mr. S.C. Gupta Member

Mr. M.K. Goel, Director (ID&A) Permanent Invitee

Mr. R. Nagarajan, Director (F&FO) Permanent Invitee

Scope and terms of reference

The appointment of Directors and payment of their remuneration are decided by President of India as per the Articles of

Association of the Company. However, in line with the requirement under Department of Public Enterprises (DPE)

guidelines for implementation of revised pay scales, the company constituted a Remuneration Committee on 29th

January, 2010 headed by an Independent Director to decide the quantum of annual/variable pay and policy for its

distribution across the executives and non unionized supervisors, within the prescribed limits.

C. Shareholders’/Investors’ Grievance Committee

The Shareholders’/Investors’ Grievance committee met 3 times during the fiscal 2011.As on date, the Shareholders’

Grievance Committee comprises of the following members:

Mr. P. Murali Mohana Rao Chairman

Mr. M. K. Goel Member

Mr. R. Nagarajan Member

Scope and terms of reference

The Company has a Shareholders’/Investors’ Grievance Committee of Directors to look into the redressal of the

complaints of investors such as delay in transfer of shares, non-receipt of annual report/dividend etc.

Page 112: Shelf Prospectus

110

D. Loans Committee

The Loans Committee met 3 times during the Fiscal 2011. As on date, the Committee comprises of the following

members:

Mr. Satnam Singh Chairman

Mr. Devender Singh Member

Mr. M.K. Goel Member

Mr. Rajeev Sharma Member

Mr. R. Nagarajan Member

Mr. K.M. Sahni Member

Scope and terms of reference

The Loans Committee of the Directors has been constituted for sanctioning of financial assistance up to ` 500 crore to

individual schemes or projects including enhancement of financial and lease assistance and relaxation of eligibility

conditions, subject to overall ceiling of ` 10,000 crore in a financial year.

E. Committee of Functional Directors

The Committee of Functional Directors met 4 times during the fiscal 2011. As on date, the Committee comprises of the

following members:

Mr. Satnam Singh Chairman

Mr. M.K. Goel Member

Mr. Rajeev Sharma Member

Mr. R. Nagarajan Member

Scope and terms of reference

The Committee of Functional Directors has been constituted for (i) sanctioning of financial assistance upto ` 100 crore

to individual schemes or projects including enhancement of financial and lease assistance and relaxation of eligibility

conditions, subject to overall ceiling of ` 4,000 crore in a financial year. (ii) relaxation of eligibility and other

conditions of sanction as mentioned in the operational policy statement and other policy framed by the Board in respect

of financial assistance up to ` 100 crore for individual schemes/ projects, including the loans already sanctioned; and

(iii) sanction of lease assistance within the overall policy framed by Board above ` 20 crore and up to ` 50 crore.

F. Risk Management Committee

The Risk Management Committee met 43 times during the fiscal 2011. As on date, the Committee comprises of the

following members:

Mr. M.K. Goel Chairman

Mr. Rajeev Sharma Member

Mr. R. Nagarajan Member

*The unit head of AL&RM unit to be the Secretary of the Risk Management Committee

Scope and terms of reference

The Risk Management Committee’s main function is to monitor various risks likely to arise and to examine the various

risk management policies and practices adopted by the Company. Also to initiate action for mitigation of risk arising in

the operation and other related matters of the Company.

G. Committee of Directors for Investment in IPO of Central Power Sector Undertakings (CPSUs)

The Committee of Directors for Investment in IPO of Central Power Sector Undertakings (CPSUs) comprises of the

following members:

Mr. Satnam Singh Chairman

Mr. R. Nagarajan Member

Mr. K.M. Sahni Member

Page 113: Shelf Prospectus

111

Scope and terms of reference

The Committee for Investment in IPO of Central Power Sector Undertakings (CPSUs) is formed for approving equity

investment in IPOs of CPSUs and also other related matters like exit/sale decisions, the number of shares to be applied

through IPO, individual investment limit in each company on case to case basis, etc.

H. Ethics Committee

As on date, the Committee comprises of the following members:

Mr. Satnam Singh Chairman

Mr. R.H. Dholakia Member

Mr. Ajit Prasad Member

Scope and terms of reference

1. To ensure that ethical business practices are being followed in managing the affairs of the Company.

2. To ensure that all business dealings with clients and suppliers are carried out with utmost transparency and

integrity and the company’s interest is not compromised.

3. To ensure that the business and affairs of the Company are carried out in accordance witht the applicable laws,

rules and regulations.

4. To ensure that all the disclosures made by the company are full, fair, accurate and timely and does not in any way

harm, defame or discredit the Company.

5. To monitor the implementation of the “Code of Conduct and recommend additions/deletions in the code to the

Board of Directors.”

Payment or Benefit to Officers of our Company

Our Company follows a pay structure in conformity with the guidelines issued by DPE from time to time. Our

Company also has in place various incentive schemes as a part of its compensation strategy to increase productivity and

reward performance. Monetary benefits are paid to the employees on the basis of their individual and group

performance.

Further, except certain post retirement medical benefits and statutory benefits on superannuation, no officer of our

Company is entitled to any benefit on superannuation.

Our Board and shareholders have approved an employee stock option scheme, in compliance with the

ESOP guidelines. However, no options have been granted under such scheme titled “PFC ESOP 2010”, as on date.

On retirement, our employees are entitled to superannuation benefits. No officer or other employee of our Company is

entitled to any benefit on termination of his employment in our Company, other than statutory benefits such as

provident fund and gratuity in accordance with the applicable laws.

Page 114: Shelf Prospectus

Management Organisation Structure

Abbreviations:-

R-APDRP: Restructured-Accelerated Power Development & Reforms Progra

Public Relations, HR: Human Resources, SSA: State Sector Analysis, RR: Reform & Review, EBM: Estate and Building

Management, FG: Facilitation Group, Ren. Energy & CDM: Renewable Energy & Clean Development Mechanism,

Reg. Office: Regional Office, Fin. Group: Finance Group, EIG & FP: Equity Investment Group and Financial

Products, Corp. Accts.: Corporate Accounts, Fund Mgmt. & Banking: Fund Management & Banking, Corp. Risk

Assurance: Corporate Risk Assurance, AL & RM: Asset Lia

System: Financial System, RM (D) & DS (F).: Resource Mobilization (Domestic) & Debt Servicing (Foreign), RM (F)

& DS (D): Resource Mobilization (Foreign) & Debt Servicing (Domestic), RM (Public Issue):

(Public Issue), EA & EC.: Establishment Accounts & Establishment Concurrence, Lending Conc.: Lending

Concurrence

112

Management Organisation Structure

Accelerated Power Development & Reforms Programme, MS: Management System, PR:

Public Relations, HR: Human Resources, SSA: State Sector Analysis, RR: Reform & Review, EBM: Estate and Building

Management, FG: Facilitation Group, Ren. Energy & CDM: Renewable Energy & Clean Development Mechanism,

ice: Regional Office, Fin. Group: Finance Group, EIG & FP: Equity Investment Group and Financial

Products, Corp. Accts.: Corporate Accounts, Fund Mgmt. & Banking: Fund Management & Banking, Corp. Risk

Assurance: Corporate Risk Assurance, AL & RM: Asset Liability and Risk Management, Disb.: Disbursement, Fin.

System: Financial System, RM (D) & DS (F).: Resource Mobilization (Domestic) & Debt Servicing (Foreign), RM (F)

& DS (D): Resource Mobilization (Foreign) & Debt Servicing (Domestic), RM (Public Issue):

(Public Issue), EA & EC.: Establishment Accounts & Establishment Concurrence, Lending Conc.: Lending

mme, MS: Management System, PR:

Public Relations, HR: Human Resources, SSA: State Sector Analysis, RR: Reform & Review, EBM: Estate and Building

Management, FG: Facilitation Group, Ren. Energy & CDM: Renewable Energy & Clean Development Mechanism,

ice: Regional Office, Fin. Group: Finance Group, EIG & FP: Equity Investment Group and Financial

Products, Corp. Accts.: Corporate Accounts, Fund Mgmt. & Banking: Fund Management & Banking, Corp. Risk

bility and Risk Management, Disb.: Disbursement, Fin.

System: Financial System, RM (D) & DS (F).: Resource Mobilization (Domestic) & Debt Servicing (Foreign), RM (F)

& DS (D): Resource Mobilization (Foreign) & Debt Servicing (Domestic), RM (Public Issue): Resource Mobilization

(Public Issue), EA & EC.: Establishment Accounts & Establishment Concurrence, Lending Conc.: Lending

Page 115: Shelf Prospectus

113

STOCK MARKET DATA FOR OUR EQUITY SHARES/DEBENTURES

The stock market data for the Equity Shares/non-convertible debentures issued by our Company listed on the NSE and

/or BSE are set forth below. Stock market data for issued debentures which are listed only on NSE has been given

separately. The debentures for which data is not stated are infrequently traded on the respective stock exchange(s).

1. Equity Shares

Our Company’s Equity Shares are listed on the BSE and NSE.

As our Company’s shares are actively traded on the NSE and BSE, stock market data has been given separately for each

of these Stock Exchanges.

1. The high and low closing prices recorded on NSE (as applicable) during the last three years and the number of

equity shares traded on the days the high and low prices were recorded are stated below.

NSE

Year

ended

March

31

High

(`̀̀̀)

Date of

High

Volume on

date of high

(no. of

equity

shares)

Low

(`̀̀̀)

Date of Low Volume on

date of low

(no. of

equity

shares)

Average

price for

the year

(`̀̀̀)

2011 380.60 October 13, 2010 383,682 220.85 March 22, 2011 1,256,092 304.83

2010 282.70 January 14, 2010 849,406 134.50 April 13, 2009 1,187,117 224.18

2009 186.55 May 5, 2008 5,948,464 90.65 October 27,

2008

244,403 130.17

Source: www.nseindia.com

(1) Average computed based on number of trading days during the year

2. The high and low prices and volume of equity shares traded on the respective dates during the last six months are

as follows:

NSE

Month High

(`̀̀̀)

Date of

High

Volume on

date of high

(no. of

equity

shares)

Low

(`̀̀̀)

Date of Low Volume on

date of low

(no. of equity

shares)

Average

price for

the month

(`̀̀̀)

August 2011 187.85 August 1, 2011 2,137,916 133.05 August 26, 2011 4,185,307

161.51

July 2011 216.85

July 18, 2011 8,003,233

184.15

July 29, 2011 4,982,644

200.39

June 2011 205.20

June 2, 2011 3,136,014

170.95

June 21, 2011 4,206,632

190.80

May 2011 231.60

May 2, 2011 1,167,260

199.50

May 27, 2011 34,397,038

212.47

April 2011 261.15

April 7, 2011 658,827 223.35 April 25, 2011 2,457,917 242.72

March

2011

267.50 March 4, 2011 1,280,082 220.85 March 22, 2011 1,256,092 243.65

Source: NSE

The average price has been computed based on the daily closing price of equity shares.

3. The high and low closing prices recorded on BSE (as applicable) during the last three years (or such lesser period

as may be applicable) and the number of equity shares traded on the days the high and low prices were recorded are

stated below.

Page 116: Shelf Prospectus

114

BSE

Year

ended

March

31

High

(`̀̀̀)

Date of

High

Volume on

date of high

(no. of

equity

shares)

Low

(`̀̀̀)

Date of Low Volume on

date of low

(no. of equity

shares)

Average

price for

the year

(`̀̀̀)

2011 379.9 October 13, 2010 57,162 221.35 March 22, 2011 1,10,631 304.62

2010 281.75 January 14, 2010 215,358 134.50 April 13, 2009 2,22,346 224.07

2009 186.65 May 5, 2008 2,173,420 90.40 October 27,

2008

4,12,604 130.12

Source: www.bseindia.com

(1) Average computed based on number of trading days during the year

4. The high and low prices and volume of equity shares traded on the respective dates during the last six months are

as follows:

BSE

Month High

(`̀̀̀)

Date of

High

Volume on

date of high

(no. of

equity

shares)

Low

(`̀̀̀)

Date of Low Volume on

date of low

(no. of equity

shares)

Average

price for

the

month

(`̀̀̀)

August 2011 187.65 August 1, 2011 2,44,798 132.9 August 26, 2011 7,48,769 161.50 July 2011 216.85 July 18, 2011 7,75,247 184.15 July 29, 2011 6,23,336 200.28

June

2011

205.05 June 2, 2011 9,98,673 171 June 21, 2011 3,11,392 190.72

May

2011

231.7 May 2, 2011 1,66,831 199.45 May 27, 2011 1,08,61,829 212.48

April

2011

260.95 April 7, 2011 1,10,064 223.95 April 25, 2011 1,01,328 242.59

March

2011

266.65 March 4, 2011 1,44,713 221.35 March 22, 2011 1,10,631 243.53

Source: BSE

The average price has been computed based on the daily closing price of equity shares.

The stock market data for the nonconvertible debentures issued by our Company listed on the NSE is appended as

Annexure (III)

Page 117: Shelf Prospectus

115

FINANCIAL INDEBTEDNESS

Details of financial indebtedness as on 30th June, 2011:

Bonds Outstanding as on June 30, 2011 Issued by our Company:

Set forth below is a brief summary of our significant outstanding bonds as on June 30, 2011 together with a brief

description of certain significant terms of such financing arrangements.

(i) Taxable Bonds (secured by means of government guarantee):

Our Company has issued government guaranteed bonds, on private placement basis outstanding as on June 30, 2011

two series aggregating to ` 22 Crs. The details of these bonds are as follows:

S.No. Nature of the Bonds Interest/Coupon Rate Redemption Amount (in `̀̀̀crores)

1. SLR non-cumulative bonds (IV

Series) of face value ` 22 crores,

2007 allotted on February 10, 1992.

12% per annum Principal amount is to

be redeemed on

February 10, 2012.

22.00

(ii) Other Taxable Bonds issued by our Company:

Our Company has issued Taxable bonds, on private placement basis outstanding as on June 30, 2011 are below

mentioned series aggregating to ` 61,096.38 Crores. The details of these bonds are as follows:

Taxable Non- Convertible Redeemable Bonds (Unsecured):

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

1. United

Bank of

India

Taxable, unsecured, non-

convertible, redeemable bonds

(2012) (XI Series) in the nature

of debentures allotted on

February 20, 2002 of the

aggregate value ` 774.08 crores.

(1)(2)

9.25% Principal amount is

redeemable at the end of

the 10th

year from

February 20, 2002 with

put and call option at the

end of seven years from

February 20, 2002.

744.08

2. IL& FS

Trust

Company

Limited

Unsecured, redeemable, non-

convertible, taxable, bonds

(2022) XIX Series in the nature

of debentures of the face value `

0.10 crores each aggregating to

` 750 crores. The discounted

value of the bonds was `

157.958 crores, allotted in

December 30, 2002. (1)(2)

The notional value of the bonds

as on June 30, 2011 was `

306.50 crores.

Zero coupon Principal amount is

redeemable on the

expiry of 20 years from

December 30, 2002.

750.00

3. IL& FS

Trust

Company

Limited

Unsecured, redeemable, non-

convertible, transferable, taxable

bonds (2017) (XVIII Series) in

the nature of debentures with

separately transferable

redeemable principal parts of `

0.10 crores each of an aggregate

nominal value of ` 250 crores

allotted on November 13, 2002

to Life Insurance Corporation of

India.(1)(2)(3)

7.87% Principal amount is

redeemable in 10 equal

annual installments of `

25 crores beginning

from the date next to the

expiry of sixth year after

an initial moratorium

period of five years from

November 13, 2002.

175.00

Page 118: Shelf Prospectus

116

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

4. IL& FS

Trust

Company

Limited

Unsecured, redeemable, non-

convertible, transferable, taxable

bonds (2017) (XVII Series) in

the nature of debentures with

separately transferable

redeemable principal parts of `

0.10 crores each of an aggregate

nominal value of ` 250 crores

allotted on October 3, 2002. (1)(2)

8.21% Principal amount is

redeemable in 10 equal

annual installments of `

25 crores beginning

from the date next to the

expiry of sixth year after

an initial moratorium

period of five years from

October 3, 2002.

175.00

5. IDBI

Trusteeship

Services

Limited

The following bonds were

allotted in November 2, 2004:

• Unsecured redeemable,

non- convertible, non-

cumulative taxable bonds

(2011) (XXIA Series) in the

nature of debentures of the

face value of Rs. 0.10

crores each aggregating to `

301 crores (“Series

XXIA”); and

• 7% unsecured redeemable,

non- convertible, non-

cumulative taxable bonds

(2011) (XXIB Series) in the

nature of debentures of the

face value of ` 0.10 crores

each aggregating to `

168.80 crores (“XXIB

Series”).

XXIA Series: 6.80%

and

XXIB Series: 7%.

Principal amount is

redeemable at par at the

on the following dates:

XXIA Series: November

2, 2011, with a put and

call option at the end of

five years from the date

of allotment.

and

XXIB Series: November

2, 2014, with a put and

call option at the end of

seven years from the

date of allotment.

86.00

168.80

6 United

Bank of

India

Taxable, unsecured, non-

convertible, redeemable bonds

(2011) (X Series) in the nature

of debenture with separately

transferable redeemable

principal parts aggregating to `

354.00 crores allotted on

November 23, 2001. (1)(2). **

9.70% 15% redeemable in the

first instalment at the

end of the fourth year.

Second, Third, Fourth,

Fifth and Sixth

instalment of 14% each

redeemable at the end of

the firth, sixth, seventh,

eighth and ninth year

and balance 15% at the

end of the 10th

year from

November 23, 2001.

53.10

7. Western

India

Trustee &

Executor

Company

Limited

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2012) (XXIII

Series) with the face value of `

0.10 crores each aggregating to

` 202.70 crores, allotted on July

5, 2005. (2)

7% Principal amount is

redeemable at par at the

end of seven years from

July 5, 2005 with a

put/call option at the end

of five years from July

5, 2005.

202.70

8 Western

India

Trustee &

Executor

Company

Limited

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2015) (XXV Series)

with the face value of ` 0.10

crores aggregating to ` 1734.70

crores with a right to retain over

subscription, allotted on

December 30, 2005. (2)

7.60% Principal amount is

redeemable at par at the

end of 10 years from

December 30, 2005.

1734.70

Page 119: Shelf Prospectus

117

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

9 Western

India

Trustee &

Executor

Company

Limited

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2016) (XXVI

Series) with the face value of `

0.10 crores aggregating to `

461.80 crores allotted on

February 24, 2006.

7.95% Principal amount is

redeemable at par at the

expiry of 10 years from

February 24, 2006.

1261.80

10. Western

India

Trustee &

Executor

Company

Limited

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2016) (XXVII A

Series) with the face value of `

0.10 crores aggregating to `

1000.00 crores allotted on

March 17, 2006 (“XXVII A

Series”).

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2013) (XXVII B

Series) with the face value of `

0.10 crores aggregating to ` 850

crores allotted on March 17,

2006 (“XXVII Series”).

XXVII A Series:

8.20% and

XXVII Series: 8.09%

XXVII A Series:

Principal amount is

redeemable at par at the

expiry 10 years from

March 17, 2006; and

XXVII Series: Principal

amount is redeemable at

par at the end of seven

years from March 17,

2006.

1000.00

850.00

11 IDBI

Trusteeship

Services

Limited

Unsecured, redeemable, non-

convertible, non-cumulative,

taxable bonds in the nature of

debentures (2011) (XXII Series)

with the face value of ` 0.10

crores aggregating to ` 1040.70

crores with a right to retain over

subscription, allotted on

December 24, 2004. (2)

7% Principal amount is

redeemable on

December 24, 2011 with

a put and call option at

the end of five years

from December 24,

2004

694.30

12. IL&FS

Trust

Company

Limited

Unsecured, redeemable, non-

convertible, taxable bonds in the

nature of debentures (2017)

(XIII Series) with the face value

of ` 0.010 crores aggregating to

` 190 crores, allotted ` 125

crores on May 16, 2002 and `

65 crores on May 24, 2002. (1)(2)

9.60% Principal amount is

redeemable at par on the

expiry of 15 years from

the dates of allotment.

190.00

13. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2021)(XXVIII Series) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 600 crores

allotted on May 31, 2006.

8.85% Principal amount is

redeemable at the expiry

of fifteen years from the

date of allotment.

600.00

14. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2016 and 2011)(XXIX

Series A and B) respectively in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 250 crores

and ` 3,00 crores allotted on

Series A-8.80% and

Series B-8.55%

Series A-September 7,

2016 and Series B-

September 7, 2011.

250.00

300.00

Page 120: Shelf Prospectus

118

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

September 7, 2006.

15. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2011(XXX) in the nature

of debentures of the face value `

0.10 crores and aggregate value

` 480 crores allotted on October

9, 2006.

8.49% October 9 2011 480.00

16. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2016)(XXXI Series A) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 1451.20

crores allotted on December 11,

2006.

Series A-8.78% Series A-December 11,

2016.

1451.20

17. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2012(XXXII) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 578.50 crores

allotted on February 19, 2007.

9.25% February 19 2012 578.50

18 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012 and 2017)( 2012-

Aand 2017 -B) in the nature of

debentures of the face value ` 1

crores and aggregate value `

122.00 crores and ` 5,61.50

crores allotted on March 22,

2007 respectively

Series A-9.80% and

Series B-9.90%

Series A-March 22,

2012 and

Series B- March 22,

2017.

122.00

561.50

19 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2017(XXXIV) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 500.50 crores

allotted on March 30, 2007.

9.90% March 30 2017 500.50

20 Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2017(XXXV) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 530.00 crores

allotted on May 18, 2007.

9.96% May 18 2017 530.00

21 Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012)(XXXVI Series B)

in the nature of debentures of

the face value ` 0.10 crores and

aggregate value ` 436.30 crores

allotted on June 15, 2007

Series B-10% Series B- June 15, 2012. 436.30

22 Western

India

Trustee &

Executor

Company

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2012(XXXVIII) in the

nature of debentures of the face

value ` 0.10 crores and

9.80% Sep 20 2012 1862.00

Page 121: Shelf Prospectus

119

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

Limited aggregate value ` 1862.00

crores allotted on Sep 20, 2007.

23. Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012 and 2017)(XL

Series B and C) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 510.00 crores and ` 650.00

crores allotted on Dec 28, 2007

Series A-9.22% and

Series B-9.28%

Series A-Dec 28, 2012

and

Series B- Dec 28, 2017.

510.00

650.00

24. Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2013(XLI-B) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 265.00 crores

allotted on Jan 15, 2008.

8.94% Jan 15 2013

265.00

25. Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2013)(XLII Series B) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 319.00 crores

allotted on Feb15, 2008.

B-9.03% Series B- Feb 15, 2013 319.00

26. Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2013)(XLIII Series B) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 271.60 crores

allotted on March 12, 2008.

Series B-9.30% Series B- March 12

2013

271.60

27. Western

India

Trustee &

Executor

Company

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds 2013(XLIV) in the nature

of debentures of the face value `

0.10 crores and aggregate value

` 1260.30 crores allotted on

March 25, 2008.

9.40% March 25 2013 1260.30

28. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2013 and 2018)(XLVII

Series B& C) in the nature of

debentures of the face value `

0.10 crores and aggregate value

`495.30 crores and ` 780.70

crores allotted on June 09, 2008.

Series B-9.60% per

annum. And Series

C-9.68% per annum

Series B- June 09 2013

and Series C June 09

2018

495.30

780.70

29. IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2011 , 2013 and

2018)(XLVIII Series A , B& C)

in the nature of debentures of

the face value ` 0.10 crores and

aggregate value ` 571.50

crores,`217.40 crores and `

259.70 crores allotted on Jul 15,

2008.

Series A-10.75% per

annum, Series B-

10.70% per annum.

and Series C-10.55%

per annum

Series A-July 15 2011

,Series B- July 15 2013

and Series C July 15

2018

571.50

217.40

259.70

30. IDBI

Trusteeship

Taxable, unsecured, non-

convertible, redeemable PFC

Series A-10.90% per

annum and Series B-

Series A- August 11

2013 and Series B-

313.60

Page 122: Shelf Prospectus

120

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

Services

Limited

bonds (2013 and 2018)(XLIX

Series A & B) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 313.60 crores ,`428.60 crores

allotted on Aug 11, 2008.

10.85% per annum. August 11 2018. 428.60

31 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2011 , 2013 and

2015)(50 Series A, B & C) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 143.00 crores,

`78.40 crores and `80.80 crores

allotted on Aug 25, 2008.

Series A-10.85% p.a.

Series B 10.75% p.a.

and Series C-10.70%

p.a.

Series A- August 25

2011, Series B- August

25 2013 and Series C –

August 25 2015

143.00

78.40

80.80

32 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2011 , 2013 and

2018)(51 Series A, B & C) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 495.20 crores,

`594.00 crores and `3024.40

crores allotted on Sep 15, 2008.

Series A-11.15%

Series B 11.10% and

Series C-11.00%

Series A- September 15

2011,

Series B- September 15

2013 and

Series C – September 15

2018

495.20

594.00

3024.40

33 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2013 , 2015 and 2018) (52 Series A, B & C) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 662.70 crores,

`5.80 crores and `1950.60

crores allotted on Nov 28, 2008.

Series A-11.40%

Series B 11.30% and

Series C-11.25%

Series A- November 28

2013,

Series B- November 28

2015 and

Series C – November 28

2018

662.70

5.80

1950.60

34 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (Feb 2014) (54 Series) in

the nature of debentures of the

face value ` 0.10 crores and

aggregate value ` 196.50 crores

allotted on Feb 16th

2009.

Series 54 8.90% Series 54, 16th February

2014

196.50

35 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012, 2014) ( Series 55-

A & B) in the nature of

debentures of the face value `

1 crores and aggregate value `

877.00 crores and ` 146.90

crores allotted on May 11th

2009

Series 55 A-6.90 % &

55 B-7.50 %

Series 55 A- 11th

May

2012 &

Series 55 B-11th May

2014

877.00

146.90

36 IDBI

Trusteeship

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds (2012) (Series 56 in the

nature of debentures of the face

value of 0.10 crores and

aggregate value `525.00 crores

and allotted on 9th July 2009.

Series 56 7.20% Series 56 9th

July 2012 525.00

37 IDBI

Trusteeship

Services

Taxable unsecured non-

convertible redeemable PFC

bonds Series 57-B (2014,2019

Series 57-B 8.60% STRPP with redemption

on 7th

August 2014, 7th

August 2019 and 7th

2599.50

Page 123: Shelf Prospectus

121

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

Limited and 2024) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `2599.50 crores and

allotted on 7th August 2009

August 2024

38 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012, 2014) ( Series 58-

A & B) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 100.00 crores and ` 331.10

crores allotted on September

17th

2009

Series 58-A 7.75%

Series 58-B 8.45%

Series 58 A- 17th

September 2012 &

Series 58 B-17th

September 2014

100.00

331.10

39 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2014, 2019) ( Series

59- A & B) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 288.20 crores and ` 1216.60

crores allotted on October

15,2009.

Series 59-A 8.45%

Series 59-B 8.80%

Series 59 A- 15th

October 2014 &

Series 59 B-15th

October

2019.

288.20

1216.60

40 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2012, 2019) (Series 60-

A & B) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 175.00 crores and ` 925.00

crores allotted on November 20,

2009.

Series 60-A

1Y

INCMTBMK+135bps

Series 60-B 1Y

INCMTBMK+179bps

Series 60 A-20th

November 2012 &

Series 60 B 20th

November 2019.

175.00

925.00

41 IDBI

Trusteeship

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 61 (2014,2019 and

2024) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `1053.00 crores and

allotted on 15th

Dec 2009

Series 61-8.50% STRPP with redemption

on 15th Dec 2014, 15th

Dec 2019 and 15th

Dec

2024

1053.00

42 IDBI

Trusteeship

Services

Limited

Taxable, unsecured, non-

convertible, redeemable PFC

bonds (2020, 2025) (Series 62-

A & B) in the nature of

debentures of the face value `

0.10 crores and aggregate value

` 845.40 crores and ` 1172.60

crores allotted on January 15,

2010.

Series 62-A 8.70%

Series 62-B 8.80%

Series 62 A- 15th

Jan

2020 &

Series 62 B-15th Jan

2025.

845.40

1172.60

43 IDBI

Trusteeship

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 63 (2015,2020 and

2025) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `552.00 crores and

allotted on 15th

March 2010

Series 63-8.90% STRPP with redemption

on 15th

March 2015,

15th

March 2020 and

15th

March 2025

552.00

Page 124: Shelf Prospectus

122

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

44 IDBI

Trusteeship

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 64 (2015,2020 and

2025) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `1476.00 crores and

allotted on 30th March 2010

Series 64-8.95% STRPP with redemption

on 30th

March 2015

30th

March 2020 and

30th

March 2025

1476.00

45 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 65 (2015,2020 and

2025) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `4012.50 crores and

allotted on 14th May 2010

Series 65-8.70% STRPP with redemption

on 14th May 2015 14th

May 2020 and 30th

May

2025

4012.50

46 PNB

Investment

Services

Limited

Taxable, unsecured,

nonconvertible, redeemable PFC

bonds (2020, 2025 & 2030)

(Series 66- A, B & C) in the

nature of debentures of the face

value ` 0.10 crores and

aggregate value ` 500.00 crores,

` 1532.00 crores and ` 633.00

crores allotted on

June 15,2010.

Series 66-A 8.65%

Series 66-B 8.75%

Series 66-C 8.85%

Series 66 A- 15th June

2020,

Series 66B- 15thJune

2025 &

Series 66 C- 15th June

2030

500.00

1532.00

633.00

47 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 67 (2012) in the

nature of debentures of the face

value of `0.10 crores and

aggregate value `1100.00 crores

and allotted on 15th July 2010

Series 67-7.10% 15th

July 2012. 1100.00

48 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds (Series 68-A,B)

(2015,2020) in the nature of

debentures of the face value of

`0.10 crores and aggregate

value `147.00 crores and `

1424.00 Crores allotted on 4th

August 2010

Series A- 8.25%

Series B- 8.70%

15th

July 2015- Series A,

15th July 2020- Series B.

147.00

1424.00

49 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 69 (2012) in the

nature of debentures of the face

value of ` 0.10 crores and

aggregate value `950.00 crores

and allotted on 15th September

2010

Series 69-7.89% 15th

September 2012. 950.00

50 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 70 (2020) in the

nature of debentures of the face

value of `0.10 crores and

aggregate value `1549.00 crores

and allotted on 15th November

2010

Series 70-8.78% 15th November 2020. 1549.00

Page 125: Shelf Prospectus

123

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount (in

`̀̀̀crores)

51 PNB

Investment

Services

Limited

Taxable unsecured non-

convertible redeemable PFC

bonds Series 71 (2020,2025 and

2030) in the nature of

debentures of the face value of

`0.30 crores and aggregate

value `578.10 crores and

allotted on 15th December

2010

Series 71-9.05% STRPP with redemption

on 15th December 2020

15th December 2025

and 15th December

2030

578.10

52 PNB

Investment

Services

Limited

Taxable, unsecured non-

convertible redeemable bonds (

2018 & 2021) (72-A & B

series) in nature of debentures

allotted on January 14,2011 of

aggregate value of `144.00

crores & ` 1219.00 crores.

8.97% (Series 72-A)

8.99% (Series 72-B)

Principal amount is

redeemable on expiry of

7 years from January

14, 2011, Principal

amount is redeemable

on expiry of 10 years

from January 14, 2011

144.00

1219.00

53 PNB

Investment

Services

Limited

Taxable, unsecured non-

convertible redeemable bonds

(2021) (73 series) in nature of

debentures allotted on April 15,

2011 of aggregate value of

`1000.00 crores.

9.18% Principal amount is

redeemable on expiry of

10 years from April 15,

2011

1000.00

53 PNB

Investment

Services

Limited

Taxable, unsecured non-

convertible redeemable bonds (

2021 ) (74 series) in nature of

debentures allotted on June

09,2011 of aggregate value of

`1693.20 crores.

9.70% Principal amount is

redeemable on expiry of

10 years from June 09,

2011

1693.20

54 PNB

Investment

Services

Limited

Taxable, unsecured non-

convertible redeemable bonds

(2014, 2016 & 2021 ) (75-A, B

& C series) in nature of

debentures allotted on June

29,2011 of aggregate value of

`555.00 crores, ` 360 crores & `

2084.70 crores

9.64% (Series 75-A)

9.62% (Series 75-B)

9.61% (Series 75-C)

Principal amount is

redeemable on expiry of

3 years from June 29,

2011

Principal amount is

redeemable on expiry of

5 years from June 29,

2011

Principal amount is

redeemable on expiry of

10 years from June 29,

2011

555.00

360.00

2084.70

Long Term Infrastructure Bonds (Secured):

Sl.

No:

Name of

the Trustee

Nature of Bonds Interest/Coupon

Rate p.a.

Redemption Amount

(in `̀̀̀crores)

1 GDA

Trustee &

Consultancy

Ltd.

Long Term Infrastructure Bonds

in the nature of Secured,

Redemable (2021), Non

Convertible Debentures (Series I)

8.30% Principal amount is

redeemable One date, being

the date falling ten years

from the March 31, 2011

66.84

2 GDA

Trustee &

Consultancy

Ltd.

Long Term Infrastructure Bonds

in the nature of Secured,

Redemable (2021), Non

Convertible Debentures (Series II)

8.30%

(compounded

annually)

Principal amount is

redeemable One date,

being the date falling ten

years from the March 31,

2011

139.67

3 GDA

Trustee &

Consultancy

Ltd.

Long Term Infrastructure Bonds

in the nature of Secured,

Redemable (2026), Non

Convertible Debentures (Series

8.50% Principal amount is

redeemable One date,

being the date falling

fifteen years from the

6.13

Page 126: Shelf Prospectus

124

III) March 31, 2011

4 GDA

Trustee &

Consultancy

Ltd.

Long Term Infrastructure Bonds

in the nature of Secured,

Redemable (2026), Non

Convertible Debentures (Series

IV)

8.50%

(compounded

annually)

Principal amount is

redeemable One date,

being the date falling

fifteen years from the March 31, 2011

22.72

C Foreign currency Loans/Bonds availed/Issued by our Company

Nature of Borrowings Amount (in `̀̀̀crores)

Foreign currency loan from ADB under CFS 32.56

Bilateral credit from Credit National France 96.23

Loan from World Bank 1.37

Loan from KFW 59.19

Loan from KFW portion II 13.40

Loan from ADB (New Loan) 96.06

6.61 % Senior Notes ( USPP - I ) 812.70

Syndicated Bank Loan – VII 1,354.50

Syndicated Bank Loan – VIII 1,147.04

Syndicated Bank Loan – IX 1,203.30

Total 4,816.35

D Rupee Term Loan availed by our Company

Term Loan (Unsecured)

Nature of Borrowings Amount (in `̀̀̀crores)

Term Loan (Unsecured) LIC Of India – II 500.00

Medium Term Loan ( Unsecured ) - Andhra Bank 63.50

Medium Term Loan ( Unsecured ) - State Bank Of Patiala – VII 100.00

Medium Term Loan ( Unsecured ) - Bank Of India – VIII 1,000.00

Medium Term Loan ( Unsecured ) - State Bank Of Bikaner & Jaipur - II 350.00

Medium Term Loan ( Unsecured ) - HDFC Bank Ltd. – III 250.00

Medium Term Loan ( Unsecured ) - Bank Of Maharastra – V 300.00

Medium Term Loan ( Unsecured ) - United Bank Of India – II 250.00

Medium Term Loan ( Unsecured ) -Punjab & Sind Bank – II 375.00

Medium Term Loan ( Unsecured ) - Syndicate Bank – V 150.00

Medium Term Loan ( Unsecured ) -HDFC Bank – IV 500.00

Medium Term Loan ( Unsecured ) - Chinatrust Commercial Bank 14.50

Medium Term Loan ( Unsecured ) - Union Bank Of India – VII 400.00

Medium Term Loan ( Unsecured ) - Punjab & Sind Bank – III 190.00

Medium Term Loan ( Unsecured ) - Canara Bank – X 500.00

Medium Term Loan ( Unsecured ) - Bank Of Baroda – IV 1,000.00

Medium Term Loan ( Unsecured ) - UCO Bank – VI 500.00

Medium Term Loan ( Unsecured ) - UCO Bank – VII 400.00

Medium Term Loan ( Unsecured ) - Statebank Of Travancore – V 300.00

Medium Term Loan ( Unsecured ) - Syndicate Bank – VI 180.00

Medium Term Loan ( Unsecured ) - Bank Of Maharastra – VI 200.00

Medium Term Loan ( Unsecured ) - Uco Bank – VIII 350.00

Page 127: Shelf Prospectus

125

Medium Term Loan ( Unsecured ) - State Bank Of Mysore – VII 200.00

Medium Term Loan ( Unsecured ) - Bank Of Baroda – V 500.00

Medium Term Loan ( Unsecured ) – IIFCL 630.00

Medium Term Loan ( Unsecured ) - Canara Bank – XI 500.00

Medium Term Loan ( Unsecured ) - Indian Bank –II 500.00

Medium Term Loan ( Unsecured ) - Vijya Bank-II 700.00

Medium Term Loan ( Unsecured ) - Union Bank Of India – VIII 1,080.00

Medium Term Loan ( Unsecured ) - The Ratnakar Bank Ltd 40.00

Medium Term Loan ( Unsecured ) -Canara Bank-XII 500.00

Medium Term Loan ( Unsecured ) - Punjab & Sind Bank – IV 335.00

Medium Term Loan ( Unsecured ) - United Bank Of India – III 250.00

Medium Term Loan ( Unsecured ) - Bank Of Maharastra – VII 200.00

Medium Term Loan ( Unsecured ) - Vijaya Bank-III 250.00

Medium Term Loan ( Unsecured ) - Union Bank Of India – IX 900.00

Medium Term Loan ( Unsecured ) - IIFCL – II 1,000.00

Medium Term Loan ( Unsecured ) - Canara Bank – XIII 500.00

Medium Term Loan ( Unsecured ) - Bank Of Baroda – VI 1,000.00

Total 16,958.00

Short Tem Loan (Unsecured)

Nature of Borrowings Amount (in `̀̀̀crores)

Short Term Loan - Mizuho Corporate Bank Ltd. 400.00

Short Term Loan -Canara Bank 500.00

Total 900.00

Commercial Paper (Unsecured)

Nature of Borrowings Amount (in `̀̀̀crores)

PFC Commercial Paper (18.08.2011 ) - 9.13 % -(47th Issue -1000 Crore) 1,000.00

Total 1,000.00

E. Foreign Currency Loans (FCNR(B) from banks)

Name of Lender(s) Amount (in `̀̀̀crores)

Union Bank of India (Term Loan of US$ 40 million through sanction letter dated June 2,

2010 and terms loan agreement dated June 7, 2010)

180.60

Total 180.60

Servicing behaviour on existing debt securities, payment of due interest on due dates on term loans and debt

securities

As on the date of this Shelf Prospectus, there has been no defaults in payment of principal or interest on any term loan

or debt securities issue by the company in the past.

Page 128: Shelf Prospectus

126

SECTION V – LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

Except as described below, there are no outstanding litigations, suits or criminal or civil prosecutions, proceedings or

tax liabilities against us, our Directors, our Subsidiaries, that would have a material adverse effect on our business and

there are no defaults, non-payment or overdue of statutory dues, institutional / bank dues and dues payable to holders of

any debentures, bonds and fixed deposits that would have a material adverse effect on our business other than

unclaimed liabilities against us, our Directors, our subsidiaries, as of the date of this Shelf Prospectus.

A. PENDING LITIGATION AGAINST OUR COMPANY:

1. Civil Cases:

Bihar State Hydroelectric Power Corporation Limited ("BSHPCL") filed a civil suit for declaration (No. 173 of

2005) in the Court of Sub Judge-1 Civil, Patna to restrain our Company from recovering its dues from BSHPCL in

respect of two loans availed by BSHPCL from our Company. BSHPCL alleged that our Company was not entitled

to claim more than twice the principal amount of loan from BSHPCL under the provisions of the Bihar Money

Lenders Act, 1974. Our Company has filed its reply and no rejoinder has yet been filed by BSHPCL. BSHPCL has

since paid the entire amount as per the out of court settlement with our Company. Consequently, the Company filed

an application for withdrawal of Debt Recovery Tribunal’s order to that effect which has been passed on July 28,

2011. BSHPCL shall file a withdrawal application in the matter at Patna Court.

2. Criminal Cases

The Union of India filed a criminal miscellaneous writ petition (No. 28928 of 2009) before the Allahabad High

Court praying for issuance of directions to the Central Bureau of Investigation to expeditiously complete its

investigation pertaining to a fraudulent transfer of securities from a dematerialised account(“Demat”) as well as for

further issuance of directions to our Company and certain other respondents to disallow any further transfer of the

securities and to freeze the account where the sale proceeds of the aforesaid securities/ bonds are deposited during

the pendency of the writ. Our Company has been included as a proforma party as certain bonds issued by it were a

part of the securities which were allegedly fraudulently transferred from the Demat account.

3. Consumer Complaints

(i) We are involved in a consumer complaint filed by Mr. Bir Singh Kaushik in the District Consumer Disputes

Redressal Forum at Rohtak. The complainant has raised a consumer dispute alleging deficiency of services on the

part of our Company for lesser payment of ` 8,346 alongwith interest @ 18% p.a. from the date of its accrual till its

realization and question the ature of bonds i.e. cummalative/non-cummlative. The complainant has also prayed for

payment of compensation of ` 50,000/- on account of harassment, mental tension, inconvenience and financial loss

caused along with litigation expenses amounting to ` 5,500/-. The matter is listed for next hearing on October 31,

2011.

(ii) A Compliant has been filed by Mr. Ashok Kumar Goel at Muzaffarnagar alleging the deficiency on the part of

our Company (Opposite Party No. 1) and Karvy Computershare Private Limited (Opposite Party No. 2) for non-

allotment of shares. The Complainant had applied for allotment of 700 shares in the follow on public offer of our

Company vide application no. 36872669 and paid the required application money by a cheque of HDFC Bank

dated May 12, 2011 for an amount of ` 1,42,000. The issue price of shares was ` 203, the amount payable for 700

shares was ` 1,42,100, whereas the amount amount paid was ` 1,42,000. Hence the application was rejected on

technical ground being “insufficient funds “. Refund amount of Rs. 1,42,000 was credited through NECS to the

bank account of the Complainant on May 26, 2011.The complainant has demanded ` 5,000 on account of financial

loss caused to him and ` 25,000 as compensation for the mental agony suffered by him. The next date fixed is

August 30, 2011 for filing reply.

4. Miscellaneous proceedings involving our Company

i) Tata Power Co. Ltd. vs. Union of India & Others

The Tata Power Company Limited filed a special leave petition (No. 11586 of 2009) before the Supreme Court of

India, against the final judgment and order dated April 13, 2009 of the High Court of Delhi (No. 62 of 2009),

Page 129: Shelf Prospectus

127

dismissing the writ petition filed by the Tata Power Company Limited challenging the award of the contract for the

Sasan UMPP by GoI to Reliance Power Limited. The Tata Power Company Limited alleged that the GoI had,

subsequent to the award of the contract, made changes in the terms/ basis on which tenders had been invited and

made, which conferred enormous benefit to Reliance Power Limited. Our Company, being the nodal agency for

implementation of UMPPs, has been included as a proforma party. The matter is likely to be listed for next hearing

in the month of February 2012.

ii) M. Ravi vs. Union of India & Others

M.Ravi, an employee of our Company who has joined the corporation on July 22, 1988, as Dy. Manager Finance,

was suspended for alleged involvement in irregular transfer of funds during the period July 1990 to May 1991.

Because of this he was rejected for the promotion for the post of Manager. He has filed a writ petition no. 8174 of

2010 before the Delhi High Court, against the decision of the Respondents No. 1 (Union of India), for rejection of

his promotion. In his petition he has prayed that the Hon’ble High Court to direct for quashing his suspension order

and promoting him as General Manager w.e.f. July 01, 2005 along with all consequential and financial benefits.

Last date fixed for hearing in the matter was May 20, 2011. Twelve weeks time has been given to our Company for

filing reply. Accordingly the Company has filed its reply. .

iii) Korea Electric Power Data Network Company Ltd. vs. The Government of Kerla and others

Korea Electric Power Data Network Company Limited, filed a writ petition (No. 311 of 2011) in the High Court of

Kerala challenging the order dated December 27, 2010 of the Government of Kerala wherein it cancelled the

sanction accorded to the Kerala State Electricity Board to entrust the implementation of the IT system for 43 towns

in Kerala under Part A of the R-APDRP scheme to the petitioner. The petitioner also prayed for grant of stay on the

aforesaid order. The High Court of Kerala has awarded a stay on the order dated December 27, 2010, by its order

dated January 5, 2011. Our Company being the designated nodal agency for implementing the R-APDRP scheme

has prepared the guidelines for selection of an ITIA under the guidance of the MoP, has been included as a

proforma party to the writ petition. The matter is listed for next hearing on October 10, 2011.

iv) Kuljit Singh and Another vs. Power Finance Corporation & Another

M/s Kuljit Singh and Another has filed writ petition no. 5146/2011 in the Delhi High Court, challenging the

debarment of our Company vide order dated July 19, 2011 and Show Cause Notice dated June 20, 2011 and letter

dated July 14, 2011 issued by our Company in respect of debarment of E&Y for acts of omission and commission

in the evaluation of Sasan UMPP RFQ/RFP bids. The court after hearing parties directed that the counter affidavit

be filed within 6 weeks and rejoinder before the next date of hearing. The court has stayed the operation of the

order dated July 19, 2011with the clarification that such stay would however not entitle the petitioner to deal with

the respondent no. 1 i.e. our Company. The court also stated that if our Company intends to put up the order of

black listing in its website, leave of court for the same shall have to be obtained. The Court was pleased to adjourn

the matter to November 04, 2011.

B. LITIGATION PREFERRED BY OUR COMPANY

i) Our company had filed a money recovery suit (No. 734/04) in the court of Addl. District Judge, Tis Hazari,

Delhi for recovery of ` 9,07,440 against Mr. Mukesh Kumar Gupta, on account of his failing to clear dues

outstanding against him. The said suit was decreed ex-parte in favour of our Company by the order of the Addl.

District Judge dated December 3, 2005, for an amount of ` 907,440 with interest @ 4.5% from the date of suit till

the date of decree and future interest @ 4.5% from the date of decree till the date of realization along with the cost

of suit. We had filed an execution petition before the Court of Civil Judge, Ghaziabad on July 27, 2007. The matter

is listed for next hearing on August 26, 2011.

ii) Our company has filed an Original Application (OA No. 153/2011) u/s 19 of The Recovery of Debts Due to

Banks and Financial Institutions Act, 1993 against Om Shakti Renergies Limited and Others (“Defendants”)

before the Debt Recovery Tribunal – II, New Delhi on June 22, 2011 for recovery of a sum of Rs. 13.94 crores. The

defendants has availed the financial assistance for the project envisaging setting up of 6 MW biomass based

generation of electricity project in Pannur Village, Chitoor District, Andhra Pradesh from our Company, which

they failed and neglected to repay. Our Company has prayed for payment of outstanding loan of Rs. 13.94 crores.

DRT has issued notice on the basis of Original Application upon the defendants. In the last hearing, which was held

on August 18, 2011, the matter had to come up for the Service Report (filing an Affidavit about due service of

issued notices upon the given addresses of Defendants) before the Learned Registrar, which was filed but no

effective hearing could take place because of the sad demise of some close relative of DRT, Delhi staff member

and matter has now been adjourned to September 22, 2011.

Page 130: Shelf Prospectus

128

C. INCOME TAX APPEALS PREFERRED BY THE COMPANY & APPEALS MADE BY TAX

AUTHORITIES

1. Assessment Year 2001-2002

The Additional Commissioner of Income Tax, Range 14, New Delhi raised a demand via order dated November

28, 2003 as rectified by order dated March 29, 2004 and August 27, 2004 on the grounds of disallowance of

deduction u/s 36(1)(viia)( c) for provision for bad and doubtful debts and partial disallowance of deduction u/s

36(1)(viii) for special reserve and exempted income u/s 10(23G). On an appeal to the CIT (Appeals) our claim was

partly allowed vide order dated October 1, 2004. We have filed an appeal (Appeal No: 5347/DEL/04) before the

ITAT, New Delhi on December 8, 2004. The ITAT, New Delhi gave us partial relief vide its order dated 25 June

2009. Being aggrieved, we have preferred an appeal before Hon’ble High Court, New Delhi on 17 November

2009, which was dismissed with a right of revival on receipt of COD approval. The same was granted only in

respect of special reserve on upfront fees. Now in view of Supreme Court judgement, COD approval is not

required. Therefore the application for revival of appeal on all issues has been filed. The appeal is yet to be

admitted. The amount in dispute is `5.13 crores which was deposited by us.

2. Assessment Year 2003-2004

i) In its order dated 31 August 2009, the ITAT did not deal with the issue of allocation of expenses to certain

ineligible incomes for the purpose of computing special reserve u/s 36(1)(viii). We preferred a miscellaneous

application (MA No. 22/Del/2010) u/s 254(2) of the Act for rectification before the ITAT, Delhi. The ITAT,

Delhi allowed the miscellaneous application but decided the same against us on the ground that the issue was

not raised before the CIT(A) and there was no request for admission of the same as an additional ground.

Aggrieved by the aforesaid order we have filed an appeal before the Hon’ble High Court on November 01,

2010, which is pending.. The amount in dispute is `0.08 crores which was deposited by us.

3. Assesment Year 2004-2005

i) The Additional Commissioner of Income Tax, Range 14, New Delhi raised a demand against us via order

dated January 31, 2005 as rectified by order dated February 15, 2005 while disallowing deduction on provision

for bad and doubtful debts u/s 36(1)(viia)(c), partly disallowed deduction in relation to the special reserve u/s

36(1)(viii) and exempted income u/s 10(23G) and making addition of income not recognised in the books of

accounts. We have filed an appeal on March 01, 2005 before the CIT (Appeals), New Delhi. The CIT

(Appeals) – X, New Delhi vide order dated March 25, 2010 gave us partial relief. Afterthat, we have preferred

an appeal before Income Tax Appellate Tribunal (ITAT) (Appeal No. 2446/Del-2010) on May 21, 2010,

against the order of CIT (Appeal) which was dismissed with a right of revival on receipt of COD approval.

Now in view of Supreme Court judgement, COD approval is not required. Therefore the application for revival

of appeal on all issues has been filed before ITAT. The amount in dispute is `7.37 crores which was deposited

by us.

ii) The Additional Commissioner of Income Tax, LTU, New Delhi also filed an appeal (Appeal No. 2877/Del-

2010) before Income Tax Appellate Tribunal (ITAT) on June 09, 2010 against the order of CIT (Appeals) – X,

New Delhi granting us relief of ` 22.22 crore by allowing allocation of expenses to ineligible incomes for the

purpose of computing special reserve. The same was dismissed with a right of revival on receipt of COD

approval. Now in view of Supreme Court judgement, COD approval is not required. Therefore the application

for revival of appeal has been filed before ITAT and the matter is pending.

4. Assesment Year 2005-2006

i) The Additional Commissioner of Income Tax, Range-14, New Delhi raised a demand against us vide order

dated July 27, 2006 while partly disallowing deductions for provision for bad and doubtful debts u/s

36(1)(viia)( c), special reserve u/s 36(1)(viii) and exempted income u/s 10(23G). We have filed an appeal on

August 25, 2006 before the CIT (Appeals) – XVII, New Delhi. The CIT (Appeals) – XVII, New Delhi vide

order dtd June 21, 2010 gave us partial relief After that, we have preferred an appeal before Income Tax

Appellate Tribunal (ITAT) on 1 September 2010, against the order of CIT (Appeal) which is pending. The

amount in dispute is `8.30 crores which was deposited by us.

ii) The Assistant Commissioner of Income Tax, LTU, New Delhi filed an appeal (Appeal No. 4231/Del-2010)

before the Income Tax Appellate Tribunal (ITAT) on September 10, 2010 against the order of CIT (Appeals) –

XVII, New Delhi granting us relief of `21.13 crores by allowing of allocation of expenses to ineligible

Page 131: Shelf Prospectus

129

incomes for the purpose of computing special reserve. The appeal is pending.

iii) The Assistant Commissioner of Income Tax, LTU, New Delhi raised a demand against us vide order dated

December 27, 2010 on the ground of addition of translation gain and disallowing prior period expenses. Being

aggrieved, we have filed an appeal on 27 January 2011 before the Commissioner of Income Tax (Appeals),

LTU which is listed for hearing on August 17, 2011. The amount in dispute is `9.24 crores which was

deposited by us.

5. Assesment Year 2006-2007

i) The Additional Commissioner of Income Tax, Range-14, New Delhi raised a demand against us vide order

dated December 31, 2007 while partly disallowing deductions for provision for bad and doubtful debts u/s

36(1)(viia)(c ), special reserve u/s 36(1)(viii) and exempt income u/s 10 (23G. We have filed an appeal on

February 13, 2008 before the CIT (Appeals) – XVII, New Delhi. The CIT (Appeals) – XVII, New Delhi vide

order dtd June 21, 2010 gave us partial relief. Being aggrieved, we have preferred an appeal on 1 September

2010 before Income Tax Appellate Tribunal, Delhi Benches at New Delhi, which is pending. The amount in

dispute is `5.56 crores which was deposited by us.

ii) The Assistant Commissioner of Income Tax, LTU, New Delhi filed an appeal (Appeal No. 4232/Del-2010)

before the Income Tax Appellate Tribunal on September 10, 2010 against the order of CIT (Appeals) – XVII,

New Delhi granting us relief of `21.68 crores by allowing of allocation of expenses to ineligible incomes for

the purpose of computing special reserve. The appeal is pending.

6. Assesment Year 2007-2008

The Deputy Commissioner of Income Tax, LTU, New Delhi raised a demand of ` 1.38 crores against us vide order

dated December 29, 2009 partly disallowing deduction in relation to the provision for special reserve and also

disallowing the expenses incurred under section 14A read with Rule 8D in respect to dividend income earned by

us. We have filed an appeal on January 21, 2010 before the CIT (Appeals) – LTU , New Delhi, which is listed for

hearing on August 17, 2011. The demand was deposited by us.

7. Assesment Year 2008-2009

The Additional Commissioner of Income Tax, LTU, New Delhi raised a demand of ` 6.51 crore against us vide

order dated December 23, 2010 while partly disallowing deduction in relation to the provision for special reserve

We have filed an appeal on 27 January 2010 before the CIT (Appeals) LTU, New Delhi which is pending. The

demand was deposited by us.

Material Developments:

Further Public Offer

In May 2011 our company came up with a further public offer (FPO) comprising of Fresh Issue of 172,165,005 Equity

Shares of `10 each and offer for sale of 57,388,335 Equity Shares of ` 10 each at a price of ` 203 per equity share

aggregating to ` 45,782.05 million. After the FPO, the shareholding of the President of India, through the MoP, was

reduced to 73.72% of the fully diluted present paid-up equity capital of our Company. Discount of 5% to the Issue Price

was offered to Eligible Employees and to Retail Bidders.

There have not arisen, since the date of the last financial statements disclosed in this Shelf Prospectus, any other

circumstances which materially and adversely affect or are likely to affect our performance, profitability or prospects,

within the next 12 months.

Page 132: Shelf Prospectus

130

OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

The Board of Directors, at their meeting held on March 17, 2011 have approved the Issue of ‘long term infrastructure

bonds’ in one or more tranche(s), of secured, redeemable, non-convertible, cumulative/ non-cumulative debentures of

face value of ` [●] each, having benefits under Section 80CCF of the Income Tax Act, for an amount up ` 6,900 crores,

subject to the provisions of the Notification.

In accordance with the terms of the Notification, the aggregate volume of the Issue of Bonds (having benefits under

Section 80CCF of the Income Tax Act) by the Company during the Fiscal 2012 shall not exceed 25% of the incremental

infrastructure investment made by the Company during the Fiscal 2011.

Eligibility to make the Issue

The Company, the persons in control of the Company or its promoter have not been restrained, prohibited or debarred

by SEBI from accessing the securities market or dealing in securities and no such order or direction is in force.

Consents

Consents in writing of the Directors, the Compliance Officer, the Statutory Auditors, Bankers to the Company, Bankers

to the Issue, Lead Managers, Registrar to the Issue, Legal Advisors to the Issue, Credit Rating Agencies and the

Debenture Trustee for the Bondholders, to act in their respective capacities, have been obtained and shall be filed along

with a copy of each tranche prospectus with the RoC.

The Company has appointed PNB Investment Services Limited as Debenture Trustee under regulation 4(4) of the SEBI

Debt Regulations. The Debenture Trustee has given its consent to the Company for its appointment under regulation 4

(4) and also in all the subsequent periodical communications sent to the holders of debt securities.

Expert Opinion

Except the letters dated August 25, 2011 and September 7, 2011 issued by CRISIL and ICRA, respectively, in respect

of the credit rating for the Bonds, and the report dated August 27, 2011 on our financial statements and statement of tax

benefits dated August 27, 2011 issued by Raj Har Gopal & Co. and N.K. Bhargava & Co., Statutory Auditors of the

Company, the Company has not obtained any expert opinion.

Common Form of Transfer

There shall be a common form of transfer for the Bonds held in physical form and relevant provisions of the Companies

Act and all other applicable laws shall be duly complied with in respect of all transfer of the Bonds and registration

thereof.

Minimum Subscription

Under the SEBI Debt Regulations, the Company is required to stipulate a minimum subscription amount which it seeks

to raise. The consequence of minimum subscription amount not being raised is that the Issue shall not proceed and the

application moneys received are refunded to the Applicants.

The company has decided to set no minimum subscription for the issue.

No Reservation or Discount

There is no reservation in this Issue nor will any discount be offered in this Issue, to any category of investors.

Previous Public or Rights Issues by the Company during last five years

In February 2007, the company came out with a public issue of 117,316,700 equity shares of ` 10/- each at a premium

of ` 75/- each. The issue opened on January 31, 2007 and closed on February 06, 2007. The date of allotment and the

date of refund was February 19, 2007. The Equity shares offered pursuant to such issue were listed on February 23,

2007 on the stock exchange.

Page 133: Shelf Prospectus

131

In February 2011, the Company had also undertaken a public issue of ‘long term infrastructure bonds' of face value of `

5,000 each at par, in the nature of secured, redeemable, non-convertible debentures for an amount upto ` 5300 Crores.

These long term infrastructure bonds are outstanding as on the date of this Shelf Prospectus. The issue opened on

February 24, 2011 and closed on March 22, 2011. The date of allotment and the date of refund was March 31, 2011.

The long term infrastructure bonds offered pursuant to such issue were listed on April 13, 2011 on the stock exchange.

In May 2011, the company came out with a Further Public Offer of 229,553,340 equity shares of ` 10 each at a

premium of ` 193 each, comprising of Fresh Issue of 172,165,005 Equity Shares and an Offer for Sale of 57,388,335

Equity Shares alongwith an Employee Reservation Portion of 275,464 Equity Shares. Discount of 5% to the Issue Price

being ` 10.15 per Equity Share determined pursuant to completion of the Book Building Process was offered to Eligible

Employees and to Retail Bidders. The issue opened on May 10, 2011 and closed on May 12, 2011 for QIB bidders and

May 13, 2011 for all other bidders. The date of allotment was May 24, 2011 and the date of refund was May 24, 2011.

The Equity shares offered pursuant to such issue were listed on May 27, 2011 on the stock exchange.

There has been no further public or right issue after that.

Commission or Brokerage on Previous Public Issues

Our Company paid an aggregate amount of ` 2.87 crore plus service tax on account of fees for underwriting and selling

commission in relation to its issue of long term infrastructure bonds undertaken in fiscal 2011.

Change in auditors of our Company during the last three years

For Fiscal 2008 and 2009, Bansal Sinha & Co., Chartered Accountants were the statutory auditors of our Company. In

Fiscal 2009 and 2010, our Board appointed, as approved by the Office of Comptroller and Auditor General of India,

K.K. Soni & Co., Chartered Accountants as our statutory Auditors. In Fiscal 2010, our Board appointed, as approved by

the Office of Comptroller and Auditor General of India, Raj Har Gopal & Co., Chartered Accountants as our Statutory

Auditors, jointly with K.K. Soni & Co. In Fiscal 2011, our Board appointed, Mehra Goel & Co., Chartered

Accountants, as approved by the Office of Comptroller and Auditor General of India, in place of K.K. Soni & Co. Our

financial statements for the Fiscal March 31, 2011, were audited jointly by Raj Har Gopal & Co., Chartered

Accountants and Mehra Goel & Co., Chartered Accountants. In Fiscal 2012, our Board appointed, as approved by the

Office of Comptroller and Auditor General of India, N.K. Bhargava & Co., Chartered Accountants as our statutory

auditor in place of Mehra Goel & Co.

Revaluation of assets

Our Company has not revalued its assets in the last five years.

Utilisation of Proceeds

In accordance with the terms of the Notification, the proceeds of the Issue shall be utilised towards infrastructure

lending, as defined in the relevant guidelines issued by the RBI in this regard. We shall utilize the Issue proceeds only

upon creation of security as stated in this Shelf Prospectus in the section titled ―”Terms of the Issue – Security” on

page 144 after permission or consent for creation of security pursuant to the terms of the Debenture Trust Deed. sought

to be provided as Security. The Issue proceeds shall not be utilized for providing loan to or acquisition of shares of any

of any person who is part of the same group or who is under the same management. Further, the end-use of the proceeds

of the Issue, duly certified by the statutory auditors of the Company, shall be reported in the annual reports of our

Company and other reports issued by our Company to relevant regulatory authorities, as applicable. Such reports, along

with term sheets, shall also be filed by our Company with the Infrastructure Division, DoEA, MoF, within three months

from the end of the financial year.

Statement by the Board of Directors:

(i) All monies received out of the each Tranche Issue of the Bonds to the public shall be transferred to a separate

bank account other than the bank account referred to in sub-section (3) of section 73 of the Companies Act;

(ii) Details of all monies utilised out of the each Tranche Issue referred to in sub-item (i) shall be disclosed under

an appropriate separate head in our Balance Sheet indicating the purpose for which such monies were utilised;

and

(iii) Details of all unutilised monies out of the each Tranche Issue referred to in sub-item (i), if any, shall be

disclosed under an appropriate separate head in our Balance Sheet indicating the form in which such unutilised

monies have been invested.

Page 134: Shelf Prospectus

132

The funds raised by us from previous bonds issues have been utilised for our business as stated in the respective offer

documents.

Disclaimer clause of BSE

“Bombay Stock Exchange Limited (“the Exchange”) has given vide its letter no. DCS/SP/PI-BOND001/11-12 dated

September 22, 2011, permission to this Company to use the Exchange’s name in this offer document as one of the stock

exchanges on which this company’s securities are proposed to be listed. The Exchange has scrutinized this offer

document for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this

Company. The Exchange does not in any manner:

(i) warrant, certify or endorse the correctness or completeness of any of the contents of this offer document;

or

(ii) warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or

(iii) take any responsibility for the financial or other soundness of this Company, its promoters, its

managementor any scheme or project of this Company;

and it should not for any reason be deemed or construed that this offer document has been cleared or approved by the

Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so

pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange

whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such

subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason

whatsoever.”

Disclaimer clause of RBI

RBI does not accept any responsibility or guarantee about the present position as to financial soundness of the Company

or correctness of any of the statements or representations made or opinions expressed by the Company and for

repayment of deposits or discharge of liabilities by the Company.

Listing

The Bonds will be listed on BSE. We have already received In-Principle Approval from BSE vide its letter dated

September 22, 2011.If permission to deal in and for an official quotation of the Bonds is not granted by BSE, the

Company will forthwith repay all moneys received from the Applicants in terms of the relevant tranche prospectus. If

such money is not repaid within eight days after the Company becomes liable to repay it (i.e. from the date of refusal or

within seven days from the Tranche Issue Closing Date, whichever is earlier), then the Company and every Director of

the Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the money,

with interest at the rate of 15% p.a. on application money, as prescribed under Section 73 of the Companies Act.

The Company shall use best efforts to ensure that all steps for the completion of the necessary formalities for listing at

BSE are taken within seven Working Days from the date of Allotment.

Dividend

The company has consistently paid dividend of 22.63%, 35%, 40%, & 45% for the financial years ended March 2007,

March 2008, March 2009 & March, 2010 respectively. For the financial year ended March 2011 it has already paid

interim dividend of 35% and recommended final dividend of 15% subject to approval of shareholders in the ensuing

annual general meeting.

Mechanism for redressal of investor grievances

Karvy Computershare Pvt. Limited has been appointed as the Registrar to the Issue to ensure that investor grievances

are handled expeditiously and satisfactorily and to effectively deal with investor complaints. All grievances relating to

the Issue should be addressed to the Registrar to the Issue or the Compliance Officer giving full details of the Applicant,

number of Bonds applied for, amount paid on application and Bankers to the Issue / Designated Collection Centre /

Agent to which the application was submitted.

Page 135: Shelf Prospectus

133

SECTION VI – ISSUE RELATED INFORMATION

ISSUE STRUCTURE

The Company shall issue the Bonds in one or more tranche(s), on or prior to March 31, 2012, up to the amount of `

6,900 crore approved by the Board, which does not exceeding 25% of the incremental infrastructure investment made by

the Company in Fiscal 2011.

The following are the key terms of the Bonds. This section should be read in conjunction with, and is qualified in its

entirety by, more detailed information in “Terms of the Issue” on page 135.

Issue Structure

Particulars Resident Individuals HUFs

Minimum number of Bonds per

application*

[●] Bond and in multiples of One Bond

thereafter.

[●] Bond and in multiples of One

Bond thereafter.

Terms of Payment Full amount with the Application Form Full amount with the Application Form

Mode of Allotment Dematerialized as well as physical form Dematerialized as well as physical

form

Trading Lot One Bond One Bond

*The Bonds are classified as ‘long term infrastructure bonds’ and are being issued in terms of Section 80CCF of the

Income Tax Act and the Notification. In accordance with Section 80CCF of the Income Tax Act, the amount, not

exceeding ` 20,000, paid or deposited as subscription to ‘long-term infrastructure bonds’ during the previous year

relevant to the assessment year beginning April 1, 2012 shall be deducted in computing the taxable income of a resident

individual or HUF. In the event that any Applicant applies for and is Allotted Bonds in excess of ` 20,000 (including

‘long term infrastructure bonds’ issued by any other eligible entity), the aforestated tax benefit shall be available to

such Applicant only to the extent of ` 20,000 for the Fiscal 2012.

Particulars of the Bonds being issued

The Company is offering the Bonds which shall have a fixed rate of interest. The Bonds will be issued with a face value

of ` [●] each. Interest on the Bonds shall be payable on annual or cumulative basis depending on the series selected by

the Applicants as provided below:

Bond Particulars

Series 1 2 3 4

Face Value per Bond ` [●] ` [●] ` [●] ` [●]

Frequency of Interest

payment

Annual Cumulative Annual Cumulative

Buyback Facility Yes Yes Yes Yes

Buyback Date One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

One date, being the

date falling [●] years

and one day from the

Deemed Date of

Allotment

Buyback Amount ` [●] per bond and

accrued interest

calculated from the

last interest payment

date to the Buyback

Date

` [●] per bond and

interest on

Application

Interest compounded

annually at [●] %

` [●] per bond and

accrued interest

calculated from the

last interest payment

date to the Buyback

Date

` [●] per bond and

interest on

Application

Interest compounded

annually at [●]%

Buyback Intimation The period beginning The period beginning The period beginning The period beginning

Page 136: Shelf Prospectus

134

Period not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

not more than nine

months prior to the

Buyback Date and

ending not later than

six months prior to

the Buyback Date

Interest Rate p.a (%) [●] [●] [●] [●]

Redemption/Maturity

Date

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

One date, being the

date falling [●] years

from the Deemed

Date of Allotment

Maturity Amount [●] per bond and

accrued interest

calculated from the

last interest payment

date to the maturity

date

[●] per bond and

interest on

Application

Interest compounded

annually at [●]%

[●] per bond and

accrued interest

calculated from the

last interest payment

date to the maturity

date

[●] per bond and

interest on

Application

Interest compounded

annually at [●]%

* As per the condition stipulated under the Notification the yield on the Bonds(to be paid by the Issuer) shall not exceed

the yield on government securities of corresponding residual maturity, as reported by FIMMDA, as on the last working

day of the month immediately preceding the month of the issue of the Bonds.

Terms of Payment

The entire Face Value per Bond is payable on Application. In the event of Allotment of a lesser number of Bonds than

applied for, the Company shall refund the amount paid on application to the Applicant, in accordance with the terms of

the respective tranche prospectus.

Page 137: Shelf Prospectus

135

TERMS OF THE ISSUE

The Company shall issue the Bonds in one or more tranche(s), on or prior to March 31, 2012, up to the amount of `

6,900 crore approved by the Board, which does not exceed 25% of the incremental infrastructure investment made by

the Company in Fiscal 2011.

The terms and conditions of Bonds being offered will be incorporated into the Debenture Trust Deed and are subject to

the provisions of the Companies Act, the tranche prospectus(es), the Application Form and other terms and conditions

as may be incorporated in the Debenture Trust Deed and/or Consolidated Bond certificate(s). In addition, the Issue of

Bonds in tranches shall be subject to laws as applicable from time to time, including guidelines, rules, regulations,

notifications and any statutory modifications or re-enactments relating to the issue of capital and listing of securities,

or in relation to the Company, issued from time to time by SEBI, GoI, BSE and/or other authorities and other

documents that may be executed in respect of the Bonds. The statements in these terms and conditions include

summaries of and are subject to the detailed provisions of the Debenture Trust Deed.

The [●]%, non-cumulative Bonds (“Series 1 Bonds”), the [●]%, cumulative Bonds (“Series 2 Bonds”), the [●]% non-

cumulative Bonds (“Series 3 Bonds”) and the [●]% cumulative Bonds (“Series 4 Bonds”) (Series 1 Bonds, Series 2

Bonds, Series 3 Bonds and Series 4 Bonds are collectively referred to as the “Bonds”) for an aggregate amount not

exceeding ` 6,900 crores to be issued by the Company in Fiscal 2012. The Bonds would in each case be governed by a

debenture trust deed (“Debenture Trust Deed”) to be entered into between the Company and PNB Investment Services

Limited (in its capacity as the “Debenture Trustee”, which expression shall include its successor(s)) as trustee for the

holders of the Bonds (“Bondholders”). Karvy Computershare Private Limited has been appointed as the registrar to the

issue (“Registrar” or “Registrar to the Issue”) pursuant to the appointment letter dated August 1, 2011 (as amended

and/or supplemented and/or restated from time to time, the “Registrar Appointment Letter”).

The Bonds are classified as ‘long term infrastructure bonds’ and are being issued in terms of Section 80CCF of the

Income Tax Act and the Notification. In accordance with Section 80CCF of the Income Tax Act, the amount, not

exceeding ` 20,000, paid or deposited as subscription to ‘long-term infrastructure bonds’ during the previous year

relevant to the assessment year beginning April 1, 2012 shall be deducted in computing the taxable income of a resident

individual or HUF. In the event that any Applicant applies for and is Allotted Bonds in excess of ` 20,000 in one or

more tranches (including ‘long term infrastructure bonds’ issued by any other eligible entity), the aforestated tax benefit

shall be available to such Bondholder only to the extent of ` 20,000.

Words and expressions defined in the Debenture Trust Deed and the Tripartite Agreements shall have the meaning

ascribed in the Debenture Trust Deed and/or the Tripartite Agreements, as the case may be, unless the context otherwise

requires or unless otherwise stated.

Any reference to “Bondholders” or “holders” in relation to any Bond held in dematerialized form shall mean the

persons whose name appears on the beneficial owners list as provided by the Depository and in relation to any Bond in

physical form, such holder of the Bond (whose interest shall be as set out in a Consolidated Bonds Certificate (as

defined below) whose name is appearing in the Register of Bondholders (as defined below). The Debenture Trustee acts

for the benefit of the Bondholders in accordance with the provisions of the Debenture Trust Deed.

1. Authority for the Issue

The Board of Directors, at its meeting held on March 17, 2011, has approved the Issue, in one or more tranches, of

secured, redeemable, non-convertible debentures having benefits under Section 80CCF of the Income Tax Act, for an

amount not exceeding ` 7,500 crores. Further, the Chairman and Managing Director of our Company has been

authorised to inter-change the amount to be mobilized, that has been subsequently decided as ` 6,900 crores for the

Fiscal 2012.

In terms of the Notification No. 50/2011 F.No. 178/43/2011-SO (ITA 1) dated September 9, 2011 issued by Central

Board of Direct Taxes, the aggregate volume of issuance of ‘long term infrastructure bonds’ (having benefits under

Section 80CCF of the Income Tax Act) by the Company during the Fiscal 2012 shall not exceed 25% of the incremental

infrastructure investment made by the Company during the Fiscal 2011. For the purpose of calculating the incremental

infrastructure investment, the aggregate gross infrastructure investments made by the Company during the Fiscal 2011

was considered and 25% of such incremental infrastructure investment was ` 6,913.61 crores and hence the limit for

this Issue is ` 6,900 crores.

Page 138: Shelf Prospectus

136

2. Issue, Status of Bonds

2.1. Public Issue of Bonds of the Company not exceeding ` 6,900 crores for the Fiscal 2012, to be at par in one or

more tranche(s).

2.2. The Bonds are secured pursuant to a Debenture Trust Deed. The Bondholders are entitled to the benefit of the

Debenture Trust Deed and are bound by and are deemed to have notice of all the provisions of the Debenture

Trust Deed. The Company is issuing the Bonds in accordance with the Notification and pursuant to the

Notification, the Bonds issued by the Company may be classified as ‘long term infrastructure bonds’ for the

purposes of Section 80 CCF of the Income Tax Act.

2.3. The Bonds are issued in the form of secured, redeemable, non convertible debentures. The claims of the

Bondholders shall be pari passu to the claims of the secured creditors of the Company, if any, now existing or

in the future, (subject to any obligations preferred by mandatory provisions of the applicable law prevailing

from time to time).

3. Form, Face Value, Title and Listing etc

3.1. Form

The Allotment of the Bonds shall be in a dematerialized form as well as physical form. The Company has

made depository arrangements with CDSL and NSDL for the issuance of the Bonds in dematerialized form,

pursuant to the tripartite agreement dated April 25, 2006 between the Company, CDSL and the Registrar to the

Issue and the tripartite agreement dated May 16, 2006 between the Company, NDSL and the Registrar to the

Issue (collectively, “Tripartite Agreements”).

The Company shall take necessary steps to credit the Depository Participant account of the Applicants with the

number of Bonds allotted in dematerialized form. The Bondholders holding the Bonds in dematerialised form

shall deal with the Bonds in accordance with the provisions of the Depositories Act, 1996 (“Depositories

Act”) and/or rules as notified by the Depositories from time to time.

3.1.2 The Bondholders may rematerialize the Bonds issued in dematerialized form, at any time after Allotment, in

accordance with the provisions of the Depositories Act and/or rules as notified by the Depositories from time

to time.

3.1.3 In case of Bonds issued in physical form, whether on Allotment or on rematerialization of Bonds Allotted in

dematerialized form, the Company will issue one certificate for each Series of the Bonds to the Bondholder for

the aggregate amount of the Bonds that are held by such Bondholder (each such certificate, a “Consolidated

Bond Certificate”). In respect of the Consolidated Bond Certificate(s), the Company will, on receipt of a

request from the Bondholder within 30 days of such request, split such Consolidated Bond Certificate(s) into

smaller denominations in accordance with the Articles of Association, subject to a minimum denomination of

one Bond. No fees will be charged for splitting any Consolidated Bond Certificate(s) and any stamp duty, if

payable, will be paid by the Bondholder. The request to split a Consolidated Bond Certificate shall be

accompanied by the original Consolidated Bond Certificate(s) which will, on issuance of the split Consolidated

Bond Certificate(s), be cancelled by the Company.

3.2. Face Value

The face value of each Bond is ` [●] (As mentioned in the respective tranche prospectus).

3.3. Title

3.3.1 In case of:

(i) Bonds held in the dematerialized form, the person for the time being appearing in the register of

beneficial owners maintained by the Depository; and

(ii) the Bond held in physical form, the person for the time being appearing in the Register of

Bondholders (as defined below) as Bondholder,

Page 139: Shelf Prospectus

137

shall be treated for all purposes by the Company, the Debenture Trustee, the Depository and all other persons

dealing with such person as the holder thereof and its absolute owner for all purposes whether or not it is

overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, theft or loss of

the Consolidated Bond Certificate issued in respect of the Bonds and no person will be liable for so treating the

Bondholder.

3.3.2 No transfer of title of a Bond will be valid unless and until entered on the Register of Bondholders or the

register of beneficial owners maintained by the Depository prior to the Record Date. In the absence of transfer

being registered, interest and/or Maturity Amount, as the case may be, will be paid to the person, whose name

appears first in the Register of Bondholders maintained by the Depository and/or the Company and/or the

Registrar to the Issue, as the case may be. In such cases, claims, if any, by the purchasers of the Bonds will

need to be settled with the seller of the Bonds and not with the Company or the Registrar to the Issue. The

provisions relating to transfer and transmission and other related matters in respect of the Company’s shares

contained in the Articles of Association of the Company and the Companies Act shall apply, mutatis mutandis

(to the extent applicable) to the Bond(s) as well.

3.4. Listing

The Bonds will be listed on BSE. BSE has given its in-principle listing approval by its letter dated September

22, 2011. The Designated Stock Exchange for the Issue is BSE.

3.5. Market Lot

3.5.1 The Bonds shall be allotted in physical as well as dematerialized form. As per the SEBI Debt Regulations, the

trading of the Bonds shall be in dematerialised form only in multiples of one Bond (“Market Lot”).

3.5.2 For details of Allotment, see “Issue Related Information – Issue Structure” beginning on page 133.

3.6. Procedure for Rematerialisation of Bonds

Bondholders who wish to hold the Bonds in physical form may do so by submitting a request to their

Depository Participant in accordance with the applicable procedure stipulated by the Depository Participant.

4. Transfer of the Bonds, Issue of Consolidated Bond Certificates etc

4.1. Register of Bondholders

The Company shall maintain at its registered office or such other place as permitted by law a register of

Bondholders (“Register of Bondholders”) containing such particulars as required by Section 152 of the

Companies Act. In terms of Section 152A of the Companies Act, the Register of Bondholders maintained by a

Depository for any Bond in dematerialized form under Section 11 of the Depositories Act shall be deemed to

be a Register of Bondholders for this purpose.

4.2. Lock-in Period

4.2.1. No Transfer during Lock-in Period

In accordance with the Notification, the Bondholders shall not sell or transfer the Bonds in any manner for a

period of five years from the Deemed Date of Allotment (the “Lock-in Period).

4.2.2. Transfer after Lock-in Period

(a) The Bondholders may sell or transfer the Bonds after the expiry of the Lock-in Period on the stock

exchange where the Bonds are listed.

(b) If a request for transfer of the Bond is not received by the Registrar to the Issue before the Record Date for

maturity, the Maturity Amount for the Bonds shall be paid to the person whose name appears as a

Bondholder in the Register of Bondholders. In such cases, any claims shall be settled inter se between the

parties and no claim or action shall be brought against the Company.

4.3. Transfers

Page 140: Shelf Prospectus

138

4.3.1 Transfer of Bonds held in dematerialized form:

In respect of Bonds held in the dematerialized form, transfers of the Bonds may be effected, after the expiry of

the Lock-in Period, only through the Depository where such Bonds are held, in accordance with the provisions

of the Depositories Act and/or rules as notified by the Depository from time to time. The Bondholder shall give

delivery instructions containing details of the prospective purchaser’s Depository Participant’s account to his

Depository Participant. If a prospective purchaser does not have a Depository Participant account, the

Bondholder may rematerialize his or her Bonds and transfer them in a manner as specified in section 4.3.2

below.

4.3.2. Transfer of Bonds in physical form:

Subject to the Lock-in period, the Bonds may be transferred by way of a duly executed transfer deed or

other suitable instrument of transfer as may be prescribed by the Company for the registration of transfer of

Bonds. Purchasers of Bonds are advised to send the Consolidated Bond Certificate to the Company or to such

persons as may be notified by the Company from time to time. If a purchaser of the Bonds in physical form

intends to hold the Bonds in dematerialized form, the Bonds may be dematerialized by the purchaser through

his or her Depository Participant in accordance with the provisions of the Depositories Act and/or rules as

notified by the Depositories from time to time.

4.4. Formalities Free of Charge

Registration of a transfer of Bonds and issuance of new Consolidated Bond Certificates will be effected

without charge by or on behalf of the Company, but on payment (or the giving of such indemnity as the

Company may require) in respect of any tax or other governmental charges which may be imposed in relation

to such transfer, and the Company being satisfied that the requirements concerning transfers of Bonds,

including under our Articles of Association have been complied with.

5. Debenture Redemption Reserve (“DRR”)

Pursuant to Regulation 16 of the SEBI Debt Regulations and Section 117C of the Companies Act, any

company that intends to issue debentures to create a DRR to which adequate amounts shall be credited out of

the profits of the company until the redemption of the debentures. Further, the Ministry of Company Affairs

(“MCA”) has, through its circular dated April 18, 2002, specified that public financial institutions shall create

a DRR to the extent of 50% of the value of the debentures issued through public issue. Accordingly, the

Company shall create DRR of 50% of the value of Bonds issued and allotted in terms of the Tranche

Prospectus, for the redemption of the Bonds. The Company shall credit adequate amounts to the DRR from its

profits every year until the Bonds are redeemed. The amounts credited to the DRR shall not be utilized by the

Company for any purpose other than for the redemption of the Bonds.

6. Application Amount and Tax Savings

Eligible Applicants can apply for up to any amount of the Bonds across any of the Series(s) or a combination

thereof. The Applicants will be allotted the Bonds in accordance with the Basis of Allotment. In the event any

Applicant applies for and is allotted Bonds in excess of ` 20,000 (including ‘long term infrastructure bonds’

issued by any other eligible entity), the aforestated tax benefit shall be available to such Bondholder only to the

extent of ` 20,000.

7. Deemed Date of Allotment

The Deemed Date of Allotment shall be the date as may be determined by the Board of the Company and

notified to the BSE. All benefits under the Bonds including payment of interest will accrue to the Bondholders

from the Deemed Date of Allotment. Actual Allotment may occur on a date other than the Deemed Date of

Allotment.

8. Subscription

8.1 Period of Subscription

The Issue shall remain open for the period mentioned below:

Page 141: Shelf Prospectus

139

Issue Opens on [●]

Issue Closes on [●]

The Issue shall remain open for subscription during banking hours for the period indicated above, except that

the Issue may close on such date as may be decided by the Board. In the event of an early closure of the Issue ,

the Company shall ensure that notice is provided to the prospective investors through newspaper

advertisements, at least three days prior to such earlier date of Issue closure.

8.2 Underwriting

The details of underwriting, if any, shall be specified in the respective tranche prospectus(es).

8.3 Minimum Subscription

Under the SEBI Debt Regulations, the Company is required to stipulate a minimum subscription amount which

it seeks to raise. The consequence of minimum subscription amount not being raised is that the Issue shall not

proceed and the application moneys received are refunded to the Applicants.

The company has decided to set no minimum subscription for the issue.

9. Interest

9.1. Annual Payment of Interest

9.1.1 For Series 1 Bonds and Series 3 Bonds, interest at the rate of [●]% and [●]% p.a., respectively, will be paid

annually commencing from the Deemed Date of Allotment and on the equivalent date falling every year

thereafter. The last interest payment will be made on the Maturity Date.

9.2. Cumulative Payment of Interest

9.2.1 Interest on Series 2 Bonds and Series 4 Bonds shall be compounded annually at the rate of [●]% and [●]% p.a.,

respectively commencing from the Deemed Date of Allotment and shall be payable on the Maturity Date.

9.3. Day Count Convention

Interest shall be computed on a 365 days-a-year basis on the principal outstanding on the Bonds. However,

where the interest period (start date to end date) includes February 29, interest shall be computed on 366 days-

a-year basis, on the principal outstanding on the Bonds.

9.4. Interest on Application and Refund Money

9.4.1 Application Interest

The Company shall pay to the successful Applicants, interest at the rate of [●] % p.a. on the Application

Amount, three days from the date of receipt of the Application Form, or the date of realization of the

Application Amount, whichever is later, upto one day prior to the Deemed Date of Allotment, subject to

deductions under the Income Tax Act, if the amount of such interest exceeds the prescribed limit of ` 2,500.

Interest on Application Amount shall be paid along with first interest payment compounded annually for Series

1 and Series 3 at their respective coupon rates and at buyback date or maturity date whichever is earlier

compounded annually for Series 2 and Series 4 at their respective coupon rates

9.4.2 Refund Interest

The Company shall pay interest on refund of Application Amount on the amount not Allotted, at the rate of

[●]% p.a. on the amount not Allotted, three days from the date of receipt of the Application Form, or the date

of realization of the Application Amount, whichever is later, upto one day prior to the Deemed Date of

Allotment, subject to deductions under the Income Tax Act, if the amount of such interest exceeds the

prescribed limit of ` 2,500. Interest on refund shall be paid along with the refund money. Payment of interest

on refund of Application Amount is not applicable in case of applications rejected on technical grounds or

withdrawn by the Applicants.

Page 142: Shelf Prospectus

140

10. Redemption

10.1 Unless previously redeemed under any buyback facility, the Company shall redeem the Bonds on the Maturity

Date.

10.2 Procedure for Redemption by Bondholders

The procedure for redemption is set out below:

10.2.1 Bonds held in electronic form:

No action is required on the part of Bondholders at the time of maturity of the Bonds.

10.2.2 Bonds held in physical form:

No action will ordinarily be required on the part of the Bondholder at the time of redemption, and the Maturity

Amount will be paid to those Bondholders whose names appear in the Register of Bondholders maintained by

the Company on the Record Date fixed for the purpose of redemption. However, the Company may require the

Consolidated Bond Certificate(s), duly discharged by the sole holder or all the joint-holders (signed on the

reverse of the Consolidated Bond Certificate(s)) to be surrendered for redemption on Maturity Date and sent

by the Bondholders by registered post with acknowledgment due or by the delivery to the Registrar to the

Issue or Company or to such persons at such addresses as may be notified by the Company from time to time.

Bondholders may be requested to surrender the Consolidated Bond Certificate(s) in the manner stated above,

not more than three months and not less than one month prior to the Maturity Date so as to facilitate timely

payment. See “Payment on Maturity, Redemption or Buyback” on page 142.

11. Buyback of Bonds

11.1 An Applicant subscribing to the Bonds shall, at the time of submitting the Application Form, indicate his or

her preference for utilizing the buyback facility offered by the Company for the Bonds by opting for it in the

Application Form and completing all formalities prescribed therein.

11.2 A Bondholder may at any time during the Buyback Intimation Period inform the Company in writing of the

following:

(a) A Bondholder who has opted for buyback in the Application Form, in a manner specified in section 11.1

above, may inform the Company of their intention not to utilize the buyback facility offered by the Company;

or

(b) A Bondholder who has not opted for buyback in the Application Form, in a manner specified in section 11.1

above, may inform the Company of their intention to utilize the buyback facility offered by the Company;

In the event that a Bondholder expresses his or her intention to utilize the buyback facility being offered by the

Company, such Bonds shall be bought back by the Company in a manner as specified in section 11.3 below.

11.3 For the avoidance of doubt, the Bondholders may note the following:

(a) In case a Bondholder has opted for buyback in the Application Form in the manner specified in section 11.1

above, and has not, at any time during the Buyback Intimation Period in the manner specified in section 11.2

above, expressed any intention to not utilize the buyback facility offered by the Company, the buyback shall be

effected by the Company in the manner specified in section 11.4 below;

(b) In case a Bondholder has not opted for buyback in the Application Form in the manner specified in section

11.1 above, and has not, at any time during the Buyback Intimation Period in the manner specified in section

11.2 above, expressed an intention to utilize the buyback facility offered by the Company, such Bonds shall

not be bought back by the Company and such Bonds shall continue till the Maturity Date.

(c) In case a Bondholder who has opted for buyback in the Application Form in the manner specified in 11.1

above, expresses, at any time during the Buyback Intimation Period in the manner specified in section 11.2

above, any intention to not utilize the buyback facility offered by the Company, such Bonds shall not be

bought back by the Company and such Bonds shall continue till the Maturity Date; and

Page 143: Shelf Prospectus

141

(d) In case a Bondholder who has not opted for buyback in the Application Form in the manner specified in 11.1

above, expresses, at any time during the Buyback Intimation Period in the manner specified in section 11.2

above, an intention to utilize the buyback facility offered by the Company, such Bonds shall be bought back by

the Company in the manner specified in section 11.4 below.

11.4 The buyback of Bonds from their respective Bondholders shall be effected by the Company on the Buyback

Date, subject to the terms set forth herein:

(a) Bonds held in dematerialized form

No action will ordinarily be required on part of the Bondholder. On receiving instructions from the Company,

the Registrar to the Issue would undertake appropriate corporate action to effect the buyback.

(b) Bonds held in physical form

No action would ordinarily be required on part of the Bondholder on the Buyback Date and the Buyback

Amount would be paid to those Bondholders whose names appear first in the Register of Bondholders.

However, the Company may require the Bondholder to duly surrender the Consolidated Bond Certificate to the

Company/Registrar to the Issue for the buyback 30 Working Days prior to the Buyback Date.

11.5 Any notice or letter or any other written instrument sent pursuant to section 11.1 received after the lapse of the

Buyback Intimation period but not more than 3 months after the lapse of the Buyback Intimation period shall

be accepted by the Company and the buyback facility extended but without the interest component for the

period between the record date and the date of the receipt of the written instrument. No notice or letter or any

other written instrument sent to the Company pursuant to section 11.1 above shall be accepted by the Company

if it has been received 3 months after the lapse of the Buyback Intimation Period. In such an event, the Bonds

not being eligible for buyback by the Company, shall continue till the Maturity Date. A Bondholder of whose

Bonds have not been bought back by the Company, shall be entitled to sell his or her Bonds on the stock

exchanges.

11.6 On payment of the Buyback Amounts, the Bonds shall be deemed to have been repaid to the Bondholders and

all other rights of the Bondholders shall terminate and no interest shall accrue on such Bonds.

11.7 Subject to the provisions of the Companies Act, where the Company has bought back any Bond(s), the

Company shall have and shall be deemed always to have had the right to keep such Bonds alive without

extinguishment for the purpose of resale and in exercising such right, the Company shall have and be deemed

always to have had the power to resell such Bonds, at such price and terms & conditions as permissible under

applicable regulation(s) in that regard at that point of time.

12. Payments

12.1 Payment of Interest

Payment of interest on the Bonds will be made to those Bondholders whose name appears first in the Register

of Bondholders maintained by the Depository and/or the Company and/or the Registrar to the Issue, as the case

may be as, on the Record Date. Whilst the Company will use the electronic mode of payments for making

payments, where facilities for electronic mode of payments are not available to the Bondholder or where the

information provided by the Applicant is insufficient or incomplete, the Company proposes to use other modes

of payment to make payments to the Bondholders, including through the dispatch of cheques through courier,

hand delivery or registered post to the address provided by the Bondholder and appearing in the Register of

Bondholders maintained by the Depository and/or the Company and/or the Registrar to the Issue, as the case

may be as, on the Record Date.

12.2 Record Date

The record date for the payment of interest or the Maturity Amount shall be 15 days prior to the date on which

such amount is due and payable (“Record Date”).

12.3 Effect of holidays on payments

If the date of payment of interest or principal or any date specified does not fall on a Working Day, the

succeeding Working Day will be considered as the effective date. Interest and principal or other amounts, if

Page 144: Shelf Prospectus

142

any, will be paid on the succeeding Working Day. Payment of interest will be subject to the deduction of tax as

per the Income Tax Act or any statutory modification or re-enactment thereof for the time being in force. In

case the date of payment of interest or principal or any date specified falls on a holiday, the payment will be

made on the next Working Day, without any interest for the period overdue.

12.4 Payment on Maturity, Redemption or Buyback

The procedure for payment in maturity, redemption and buyback is set out below:

12.4.1 Bonds held in electronic form:

No action is required on the part of Bondholders on the Maturity Date or Buyback Date.

12.4.2 Bonds held in physical form:

The Company may require the Consolidated Bond Certificate(s), duly discharged by the sole holder or all the

joint-holders (signed on the reverse of the Consolidated Bond Certificate(s)) to be surrendered for redemption

on the Maturity Date, or otherwise in the event of redemption or buyback, and sent by the Bondholders by

registered post with acknowledgment due or by the delivery to the Registrar to the Issue or Company or to

such persons at such addresses as may be notified by the Company from time to time. Bondholders may be

requested to surrender the Consolidated Bond Certificate(s) in the manner stated above, not more than three

months and not less than one month prior to the Maturity Date so as to facilitate timely payment.

12.5 Whilst the Company will use the electronic mode of payments for making payments, where facilities for

electronic mode of payments are not available to the Bondholder or where the information provided by the

Applicant is insufficient or incomplete, the Company proposes to use other modes of payment to make

payments to the Bondholders, including through the dispatch of cheques through courier, hand delivery or

registered post to the address provided by the Bondholder and appearing in the Register of Bondholders

maintained by the Depository and/or the Company and/or the Registrar to the Issue, as the case may be as, on

the Record Date. In the case of payment on maturity being made on surrender of the Consolidated Bond

Certificate(s), the Company will make payments or issue payment instructions to the Bondholders within 30

days from the date of receipt of the duly discharged Consolidated Bond Certificate(s). The Company shall pay

interest at 15% p.a., in the event that such payments are delayed beyond a period of eight days prescribed

under the Companies Act after the Company becomes liable to pay such amounts.

12.6 The Company’s liability to the Bondholders including for payment or otherwise shall stand extinguished from

the Maturity Date or on dispatch of the amounts paid by way of principal and/or interest to the Bondholders.

Further, the Company will not be liable to pay any interest, income or compensation of any kind accruing

subsequent to the Maturity Date.

13. Manner and Mode of Payment

13.1 Manner of Payment:

All payments to be made by the Company to the Bondholders shall be made in any of the following manners:

13.1.1 For Bonds applied or held in electronic form:

The bank details will be obtained from the Depository for payments. Investors who have applied or who are

holding the Bond in electronic form, are advised to immediately update their bank account details as appearing

on the records of their Depository Participant. Failure to do so could result in delays in credit of the payments

to investors at their sole risk and neither the Lead Managers nor the Company shall have any responsibility and

undertake any liability for such delays on part of the investors.

13.1.2 For Bonds held in physical form

The bank details will be obtained from the Registrar to the Issue for effecting payments.

13.2 Modes of Payment

All payments to be made by the Company to the Bondholders shall be made through any of the following

modes:

Page 145: Shelf Prospectus

143

13.2.1 Cheques or Demand drafts

By cheques or demand drafts made in the name of the Bondholders whose names appear in the Register of

Bondholders as maintained by the Company and/or as provided by the Depository. All Cheques or demand

drafts as the case may be, shall be sent by registered/speed post at the Bondholder’s sole risk.

13.2.2 NECS

Through NECS for Applicants having an account at any of the centers notified by the RBI. This mode of

payment will be subject to availability of complete bank account details including the Magnetic Ink Character

Recognition (“MICR”) code as appearing on a cheque leaf, from the Depository.

The Company shall not be responsible for any delay to the Bondholder receiving credit of interest or refund or

Maturity Amount so long as the Company has initiated the process in time.

13.2.3 Direct Credit

Applicants having bank accounts with the Refund Bank, as per the demographic details received from the

Depository shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund

Bank for the same would be borne by our Company.

13.2.4 Real Time Gross Settlement (“RTGS”)

Applicants having a bank account with a bank branch which is RTGS enabled as per the information available

on the website of RBI and whose refund amount exceeds ` 2 lakhs shall be eligible to receive refund through

RTGS, provided the demographic details downloaded from the Depository contain the nine digit MICR code

of the Bidder’s bank which can be mapped with the RBI data to obtain the corresponding Indian Financial

System Code (“IFSC”). Charges, if any, levied by the Refund Bank for the same would be borne by our

Company. Charges, if any, levied by the Applicant’s bank receiving the credit would be borne by the

Applicant.

13.2.5 National Electronic Fund Transfer (“NEFT”)

Payment of refund shall be undertaken through NEFT wherever the Applicants’ bank branch is NEFT enabled

and has been assigned the IFSC, which can be linked to an MICR code of that particular bank branch. IFSC

Code will be obtained from the website of RBI as on a date prior to the date of payment of refund, duly

mapped with an MICR code. Wherever the Applicants have registered their MICR number and their bank

account number while opening and operating the beneficiary account, the same will be duly mapped with the

IFSC Code of that particular bank branch and the payment of refund will be made to the Bidders through this

method. The process flow in respect of refunds by way of NEFT is at an evolving stage and hence use of

NEFT is subject to operational feasibility, cost and process efficiency and the past experience of the Registrar

to the Issue. In the event NEFT is not operationally feasible, the payment of refunds would be made through

any one of the other modes as discussed in this section.

13.3 Printing of Bank Particulars

As a matter of precaution against possible fraudulent encashment of Consolidated Bond Certificate(s) due to

loss or misplacement, the particulars of the Applicant’s bank account are mandatorily required to be provided

for printing on the Consolidated Bond Certificate. Applications without these details are liable to be rejected.

However, in relation to Applications for dematerialised Bonds, these particulars will be taken directly from the

Depository. In case of Bonds held in physical form either on account of rematerialisation or transfer, the

Bondholders are advised to submit their bank account details with the Registrar to the Issue before the Record

Date, failing which the amounts will be dispatched to the postal address of the Bondholders. Bank account

particulars will be printed on the Consolidated Bond Certificate(s) which can then be deposited only in the

account specified.

14. Taxation

14.1 The Applicants are advised to consider and seek independent advice, as may be necessary, on the tax

implications of their respective investment in the Bonds.

14.2 The interest on Bonds will be subject to deduction of tax at source at the rates prevailing from time to time

Page 146: Shelf Prospectus

144

under the provisions of the Income Tax Act or any statutory modification or re-enactment thereof.

14.3 As per the current provisions of the Income Tax Act, on payment to all categories of resident Bondholders, tax

will not be deducted at source from interest on Bonds, if such interest does not exceed ` 2,500 in a financial

year.

14.4 As per clause (ix) of Section 193 of the Income Tax Act, no income tax is required to be withheld on any

interest payable on any security issued by a company, where such security is in dematerialised form and is

listed on a recognised stock exchange in India in accordance with the Securities Contracts Regulation Act,

1956, as amended, and the rules notified thereunder. Accordingly, no income tax will be deducted at source

from the interest on Bonds held in dematerialised form. In case of Bonds held in physical form no tax may be

withheld in case the interest does not exceed ` 2,500 in a financial year. However, such interest is taxable

income in the hands of Bondholders.

14.5 If interest on Bonds exceeds the prescribed limit of ` 2,500 in a financial year in case of individual

Bondholders, to ensure non-deduction or lower deduction of tax at source, as the case may be, the Bondholders

are required to furnish either (a) a declaration (in duplicate) in the prescribed form, i.e., Form 15G which may

be given by all Bondholders other than companies, firms and non-residents subject to provisions of section

197A of the Income Tax Act; or (b) a certificate, from the assessing officer of the Bondholder, in the

prescribed form under section 197 of the Income Tax Act which may be obtained by the Bondholders.

14.6 Senior citizens, who are 60 or more years of age at any time during the financial year, can submit a self-

declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of

section 197A even if the aggregate income credited or paid or likely to be credited or paid exceeds the

maximum limit for the financial year. To ensure non-deduction/lower deduction of tax at source from interest

on Bonds, a resident Bondholder is required to submit Form 15G/15H/certificate under section 197 of the

Income Tax Act or other evidence, as may be applicable, with the Application Form, or send to the Registrar to

the Issue along with a copy of the Application Form on or before the closure of the Issue. Subsequently, Form

15G/15H/ original certificate issued under section 197 of the Income Tax Act or other evidence, as may be

applicable, may be submitted to the Company or to such person at such address as may be notified by us from

time to time, quoting the name of the sole or first Bondholder, Bondholder number and the distinctive

number(s) of the Bond(s) held, at least one month prior to the interest payment date.

14.7 Bondholders are required to submit Form 15G or 15H or original certificate issued under section 197 of the

Income Tax Act or other evidence in each financial year to ensure non-deduction or lower deduction of tax at

source from interest on Bonds.

14.8 If the Bondholder is eligible to submit Form 15G or 15H, he or she is required to tick at the relevant place on

the Application Form, to send a blank copy of the form to the Bondholders. Blank declaration form will be

furnished to other Bondholders on request made at least two months prior to the interest payment date. This

facility is being provided for the convenience of Bondholders and we will not be liable in any manner,

whatsoever, in case the Bondholder does not receive the form.

14.9 As per the prevailing tax provisions, Form 15G cannot be submitted if the aggregate of income of the nature

referred to in section 197A of the Income Tax Act viz. dividend, interest etc. as prescribed therein, credited or

paid or likely to be credited or paid during the financial year in which such income is to be included exceeds

the maximum amount which is not chargeable to tax.

14.10 Tax exemption certificate or document, if any, must be lodged at the office of the Registrar to the Issue prior to

the Record Date, or as specifically required. Tax applicable on coupon will be deducted at source on accrual

thereof in the Company’s books and / or on payment thereof, in accordance with the provisions of the Income

Tax Act and / or any other statutory modification, re-enactment or notification as the case may be. A tax

deduction certificate will be issued for the amount of tax so deducted on annual basis.

15. Security

15.1 The Bonds issued by the Company will be secured by creating a charge on the book debts of the company

along with identified immovable property by an first charge/pari pasu charge, as may be agreed between the

Company and the Debenture Trustee, pursuant to the terms of the Debenture Trust Deed.

16. Events of Default

Page 147: Shelf Prospectus

145

16.1 The Debenture Trustee at its discretion may, or if so requested in writing by the holders of not less than 75% in

principal amount of the Bonds then outstanding or if so directed by a Special Resolution shall (subject to being

indemnified and/or secured by the Bondholders to its satisfaction), give notice to the Company specifying that

the Bonds and/or any particular Series of Bonds, in whole but not in part are and have become due and

repayable at the Early Redemption Amount on such date as may be specified in such notice inter alia if any of

the events listed in 16.2 below occur.

16.2 The description below is indicative and a complete list of events of default and its consequences shall be

specified in the Debenture Trust Deed:

(i) Default is made in any payment of the principal amount due in respect of any of the Series of Bonds

and such failure continues for a period of 30 days;

(ii) Default is made in any payment of any installment of interest in respect of Series 1 Bonds and/ or

Series 3 Bonds or in the payment of cumulative interest on Series 2 Bonds and/ or Series 4 Bonds and

such failure continues for a period of 15 days;

(iii) Default is made in any payment of any other sum due in respect of any Series of the Bonds and such

failure continues for a period of 15 days;

(iv) The Company does not perform or comply with one or more of its other material obligations in

relation to the Bonds or the Debenture Trust Deed which default is incapable of remedy or, if in the

opinion of the Debenture Trustee capable of remedy, is not remedied within 30 days after written

notice of such default shall have been given to the Company by the Debenture Trustee and which has

a material adverse effect on the Company;

(v) The Company is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay (in the

opinion of the Debenture Trustee) a material part of its debts, or stops, suspends or threatens to stop

or suspend payment of all or (in the opinion of the Debenture Trustee) a material part of (or of a

particular type of) its debts; or

(vi) Any encumbrancer takes possession, or a receiver or an administrator is appointed of the whole or (in

the opinion of the Debenture Trustee) any substantial part of the property, assets or revenues of the

Company (as the case may be) and is not discharged within 45 days.

16.3 The Early Redemption Amount payable on the occurrence of an Event of Default shall be as detailed in the

Debenture Trust Deed.

16.4 If an Event of Default occurs which is continuing, the Debenture Trustee may with the consent of the

Bondholders, obtained in accordance with the provisions of the Debenture Trust Deed, and with a prior written

notice to the Company, take action in terms of the Debenture Trust Deed.

16.5 In case of default in the redemption of Bonds, in addition to the payment of interest and all other monies

payable hereunder on the respective due dates, the Company shall also pay interest on the defaulted amounts.

17. Bondholder’s Rights, Nomination Etc.

17.1 Bondholder Not a Shareholder

The Bondholders will not be entitled to any of the rights and privileges available to the equity and preference

shareholders of the Company.

17.2 Rights of Bondholders

Some of the significant rights available to the Bondholders are as follows:

(a) The Bonds shall not, except as provided in the Companies Act, confer on Bondholders any rights or

privileges available to members of the Company including the right to receive notices or annual

reports of, or to attend and / or vote, at the Company’s general meeting(s). However, if any resolution

affecting the rights of the Bondholders is to be placed before the shareholders, such resolution will first

be placed before the concerned registered Bondholders for their consideration. In terms of Section

219(2) of the Companies Act, Bondholders shall be entitled to a copy of the balance sheet on a

Page 148: Shelf Prospectus

146

specific request made to the Company.

(b) The rights, privileges and conditions attached to the Bonds may be varied, modified and / or abrogated

with the consent in writing of the holders of at least three-fourths of the outstanding amount of the

Bonds or with the sanction of a Special Resolution passed at a meeting of the concerned Bondholders,

provided that nothing in such consent or resolution shall be operative against the Company, where

such consent or resolution modifies or varies the terms and conditions governing the Bonds, if

modification, variation or abrogation is not acceptable to the Company.

(c) The registered Bondholder or in case of joint-holders, the person whose name stands first in the

Register of Bondholders shall be entitled to vote in respect of such Bonds, either by being present in

person or, where proxies are permitted, by proxy, at any meeting of the concerned Bondholders

summoned for such purpose and every such Bondholder shall be entitled to one vote on a show of

hands and on a poll, his or her voting rights shall be in proportion to the outstanding nominal value of

Bonds held by him or her on every resolution placed before such meeting of the Bondholders.

(d) Bonds may be rolled over with the consent in writing of the holders of at least three-fourths of the

outstanding amount of the Bonds or with the sanction of a Special Resolution passed at a meeting of

the concerned Bondholders after providing at least 21 days prior notice for such roll-over and in

accordance with the SEBI Debt Regulations. The Company shall redeem the Bonds of all the

Bondholders, who have not given their positive consent to the roll-over.

The above rights of Bondholders are merely indicative. The final rights of the Bondholders will be as per the

Debenture Trust Deed to be executed by the Company with the Debenture Trustee.

Special Resolution for the purpose of this section is a resolution passed at a meeting of Bondholders of at least

three-fourths of the outstanding amount of the Bonds, present and voting.

17.3 Succession

Where Bonds are held in joint names and one of the joint holders dies, the survivor(s) will be recognized as

the Bondholder(s) in accordance with applicable law and the provisions of the AoA. It will be sufficient for

the Company to delete the name of the deceased Bondholder after obtaining satisfactory evidence of his death,

provided that a third person may call on the Company to register his name as successor of the deceased

Bondholder after obtaining evidence such as probate of a will for the purpose of proving his title to the Bonds.

In the event of demise of the sole or first holder of the Bonds, the Company will recognise the executors or

administrator of the deceased Bondholders, or the holder of the succession certificate or other legal

representative as having title to the Bonds only if such executor or administrator obtains and produces probate

of will or letter of administration or is the holder of the succession certificate or other legal representation, as

the case may be, from an appropriate court in India. The Directors of the Company in their absolute discretion

may, in any case, dispense with production of probate of will or letter of administration or succession

certificate or other legal representation.

17.4 Nomination Facility to Bondholder

17.4.1 In accordance with Section 109A of the Companies Act, the sole Bondholder or first Bondholder, along with

other joint Bondholders (being individual(s)) may nominate any one person (being an individual) who, in the

event of death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Bond.

A person, being a nominee, becoming entitled to the Bond by reason of the death of the Bondholders, shall be

entitled to the same rights to which he will be entitled if he were the registered holder of the Bond. Where the

nominee is a minor, the Bondholders may make a nomination to appoint any person to become entitled to the

Bond(s), in the event of his death, during the minority. A nomination shall stand rescinded on sale of a Bond

by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When

the Bond is held by two or more persons, the nominee shall become entitled to receive the amount only on the

demise of all the Bondholders. Fresh nominations can be made only in the prescribed form available on request

at the Company’s registered or administrative office or at such other addresses as may be notified by the

Company.

17.4.2 The Bondholders are advised to provide the specimen signature of the nominee to the Company to expedite the

transmission of the Bond(s) to the nominee in the event of demise of the Bondholders. The signature can be

provided in the Application Form or subsequently at the time of making fresh nominations. This facility of

Page 149: Shelf Prospectus

147

providing the specimen signature of the nominee is purely optional.

17.4.3 In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the

provisions of Section 109A of the Companies Act, shall on the production of such evidence as may be required

by the Company’s Board or Committee of Directors, as the case may be, elect either:

(a) to register himself or herself as the holder of the Bonds; or

(b) to make such transfer of the Bonds, as the deceased holder could have made.

17.4.4 Further, the Company’s Board or Committee of Directors, as the case may be, may at any time give notice

requiring any nominee to choose either to be registered himself or herself or to transfer the Bonds, and if the

notice is not complied with, within a period of 90 days, the Company’s Board or Committee of Directors, as

the case may be, may thereafter withhold payment of all interests or other monies payable in respect of the

Bonds, until the requirements of the notice have been complied with.

17.4.5 Notwithstanding anything stated above, Applicants to whom the Bonds are credited in dematerialized form,

need not make a separate nomination with the Company. Nominations registered with the respective

Depository Participant of the Bondholder will prevail. If the Bondholders require changing their nomination,

they are requested to inform their respective Depository Participant. For Applicants who opt to hold the Bonds

in physical form, the Applicants are require to fill in the details for ‘nominees’ as provided in the Application

Form.

18. Debenture Trustee

18.1 The Company has appointed PNB Investment Services Limited to act as the Debenture Trustee for the

Bondholders. The Company intends to enter into a Debenture Trust Deed with the Debenture Trustee, the

terms of which will govern the appointment and functioning of the Debenture Trustee and shall specify the

powers, authorities and obligations of the Debenture Trustee. Under the terms of the Debenture Trust Deed, the

Company will covenant with the Debenture Trustee that it will pay the Bondholders the principal amount on the

Bonds on the relevant Maturity Date and also that it will pay the interest due on Bonds on the rate specified

under the Debenture Trust Deed.

18.2 The Bondholders shall, without further act or deed, be deemed to have irrevocably given their consent to the

Debenture Trustee or any of their agents or authorised officials to do all such acts, deeds, matters and things in

respect of or relating to the Bonds as the Debenture Trustee may in their absolute discretion deem necessary or

require to be done in the interest of the Bondholders. Any payment made by the Company to the Debenture

Trustee on behalf of the Bondholders shall discharge the Company pro tanto to the Bondholders. All the rights

and remedies of the Bondholders shall vest in and shall be exercised by the Debenture Trustee without

reference to the Bondholders. No Bondholder shall be entitled to proceed directly against the Company unless

the Debenture Trustee, having become so bound to proceed, failed to do so.

18.3 The Debenture Trustee will protect the interest of the Bondholders in the event of default by the Company in

regard to timely payment of interest and repayment of principal and they will take necessary action at the

Company’s cost.

19. Miscellaneous

19.1 Loan against Bonds

The Bonds cannot be pledged or hypothecated for obtaining loans from scheduled commercial banks during

the Lock-in Period.

19.2 Lien

The Company shall have the right of set-off and lien, present as well as future on the moneys due and payable

to the Bondholder or deposits held in the account of the Bondholder, whether in single name or joint name, to

the extent of all outstanding dues by the Bondholder to the Company.

19.3 Lien on Pledge of Bonds

Subject to applicable laws, the Company, at its discretion, may note a lien on pledge of Bonds if such pledge

of Bond is accepted by any bank or institution for any loan provided to the Bondholder against pledge of such

Page 150: Shelf Prospectus

148

Bonds as part of the funding.

19.4 Right to Reissue Bond(s)

Subject to the provisions of the Companies Act, where the Company has bought back any Bond(s), the

Company shall have and shall be deemed always to have had the right to keep such Bonds alive without

extinguishment for the purpose of resale or reissue and in exercising such right, the Company shall have and

be deemed always to have had the power to resell or reissue such Bonds either by reselling or reissuing the

same Bonds or by issuing other Bonds in their place. This includes the right to reissue original Bonds.

19.5 Joint-holders

Where two or more persons are holders of any Bond (s), they shall be deemed to hold the same as joint holders

with benefits of survivorship subject to Articles and applicable law.

19.6 Sharing of Information

The Company may, at its option, use its own, as well as exchange, share or part with any financial or other

information about the Bondholders available with the Company, its Subsidiary(ies) and affiliates and other

banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither the

Company nor its subsidiaries and affiliates nor their agents shall be liable for use of the aforesaid information.

19.7 Notices

All notices to the Bondholders required to be given by the Company or the Debenture Trustee shall be

published in one English language newspaper having wide circulation and/or, will be sent by post/courier to

the registered Bondholders from time to time.

19.8 Issue of Duplicate Consolidated Bond Certificate(s)

If any Consolidated Bond Certificate is mutilated or defaced it may be replaced by the Company against the

surrender of such Consolidated Bond Certificates, provided that where the Consolidated Bond Certificates are

mutilated or defaced, they will be replaced only if the certificate numbers and the distinctive numbers are

legible.

If any Consolidated Bond Certificate is destroyed, stolen or lost then on production of proof thereof to the

Issuer’s satisfaction and on furnishing such indemnity/security and/or documents as we may deem adequate,

duplicate Consolidated Bond Certificate(s) shall be issued.

The above requirement may be modified from time to time as per applicable law and practice.

19.9 Future Borrowings

The Company shall be entitled at any time in the future during the term of the Bonds or thereafter to borrow or

raise loans or create encumbrances or avail of financial assistance in any form, and also to issue promissory

notes or debentures or any other securities in any form, manner, ranking and denomination whatsoever and to

any eligible persons whatsoever, and to change its capital structure including through the issue of shares of any

class, on such terms and conditions as the Company may deem appropriate, without requiring the consent of,

or intimation to, the Bondholders or the Debenture Trustee in this connection.

19.10 Jurisdiction The Bonds, the Debenture Trust Deed, the Tripartite Agreement and other relevant documents shall be

governed by and construed in accordance with the laws of India. The Company has in the Debenture Trust

Deed agreed, for the exclusive benefit of the Debenture Trustee and the Bondholders, that the courts of New

Delhi are to have jurisdiction to settle any disputes which may arise out of or in connection with the Debenture

Trust Deed or the Bond

Page 151: Shelf Prospectus

149

PROCEDURE FOR APPLICATION

This section applies to all Applicants. All Applicants are required to make payment of the full Application Amount

along with the Application Form.

The tranche prospectus(es) and the Application Forms may be obtained from our Registered Office and Corporate

Office or Lead Brokers or from the Lead Managers. In addition, Application Forms would also be made available to

BSE where listing of the Bonds is sought.

Application Form

Applicants are required to submit their Applications to the Bankers to the Issue on all working days, during which issue

is open. Such Applicants shall only use the specified Application Form bearing the stamp of the Lead Managers/Lead

Brokers/Registered Members of Registered Stock Exchanges for the purpose of making an Application in terms of the

tranche prospectus(es).

WHO CAN APPLY

The following categories of persons are eligible to apply in the Issue:

• Indian nationals resident in India who are not minors in single or joint names (not more than three); and

• Hindu Undivided Families or HUFs, in the individual name of the Karta. The Applicant should specify that the

Application is being made in the name of the HUF in the Application Form as follows: “Name of Sole or First

Applicant: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”.

Applications by HUFs would be considered at par with those from individuals.

Non-resident investors including NRIs, FIIs and OCBs are not eligible to participate in the Issue.

Application Size

Applications are required to be for a minimum of [●] Bond and multiples of one Bond thereafter.

Instructions for Completing the Application Form

Applications must be:

(a) Made only in the prescribed Application Form.

(b) Completed in block letters in English as per the instructions contained in the tranche prospectus(es) and in the

Application Form, and are liable to be rejected if not so completed. Applicants should note that the Bankers to

the Issue will not be liable for errors in data entry due to incomplete or illegible Application Forms.

(c) In single name or in joint names (not more than three, and in the same order as their Depository Participant

details).

(d) Applications are required to be for a minimum of [●] Bond and in multiples of one Bond thereafter.

(e) Thumb impressions and signatures other than in English/ Hindi or any of the other languages specified in the

Eighth Schedule to the Constitution of India must be attested by a Magistrate or Notary Public or a Special

Executive Magistrate under his official seal.

(f) No receipt would be issued by the Company for the Application money. However, the Bankers to the Issue or

collection centre(s)/ agents, on receiving the Applications will acknowledge receipt by stamping and returning

the acknowledgment slip to the Applicant.

(g) In case investor does not select any of the series in the Application Form, the Company shall consider the

Series 4 for the purposes of the Allotment.

General Instructions

Dos:

1. Check if you are eligible to apply.

2. Read all the instructions carefully and complete the Application Form.

3. Applications are required to be in single or joint names (not more than three).

4. If Allotment of Bonds is sought in the dematerialised form, ensure that the details about the Depository

Participant and beneficiary account are correct and the beneficiary account is active.

5. In case of an HUF applying through its Karta, the Applicant is required to specify the name of an Applicant in

Page 152: Shelf Prospectus

150

the Application Form as “XYZ Hindu Undivided Family applying through PQR”, where PQR is the name of

the Karta.

6. Applicant’s Bank Account Details: The Bonds shall be allotted in dematerialised and physical form. For

instructions on how to apply for Allotment in the physical form, see “Procedure for Application –

Applications for Allotment of Bonds in the physical form” on page 151. In case of Allotment in

dematerialised form, the Registrar to the Issue will obtain the Applicant’s bank account details from the

Depository. The Applicant should note that on the basis of the name of the Applicant, Depository Participant’s

name, Depository Participant’s identification number and beneficiary account number provided by them in the

Application Form, the Registrar to the Issue will obtain from the Applicant’s beneficiary account, the

Applicant’s bank account details. The Applicants are advised to ensure that bank account details are updated in

their respective beneficiary accounts as these bank account details would be printed on the refund order(s), if

any. Failure to do so could result in delays in credit of refunds to Applicants at the Applicants sole risk and

neither the Lead Managers nor our Company nor the Refund Bank nor the Registrar to the Issue shall have any

responsibility and undertake any liability for such delay.

7. Applications under Power of Attorney: Unless the Company specifically agree in writing, and subject to

such terms and conditions as the Company may deem fit, in the case of Applications made under power of

attorney, a certified copy of the power of attorney is required to be lodged separately, along with a copy of the

Application Form at the office of the Registrar to the Issue simultaneously with the submission of the

Application Form, indicating the name of the Applicant along with the address, Application number, date of

submission of the Application Form, name of the bank and branch where it was deposited, cheque/demand

draft number and the bank and branch on which the cheque/demand draft was drawn.

8. Permanent Account Number: All Applicants should mention their PAN allotted under the Income Tax Act in

the Application Form. In case of joint applicants, the PAN of the first Applicant should be provided and for

HUFs, PAN of the HUF should be provided. The PAN would be the sole identification number for participants

transacting in the securities markets, irrespective of the amount of the transaction. Any Application Form

without the PAN is liable to be rejected. Applicants should not submit the GIR Number instead of the PAN as

the Application is liable to be rejected on this ground.

9. Joint Applications: Applications may be made in single or joint names (not exceeding three). In the case of

joint Applications, all payments will be made out in favour of the first Applicant. All communications will be

addressed to the first named Applicant whose name appears in the Application Form at the address mentioned

therein.

10. Multiple Applications: An Applicant may make multiple applications for the total number of Bonds required.

11. Applicants are requested to write their names and Application serial number on the reverse of the instruments

by which the payments are made.

12. Tax Deduction at Source: Persons (other than companies and firms) resident in India claiming interest on

bonds without deduction of tax at source are required to submit Form 15G/Form 15H at the time of submitting

the Application Form, in accordance with and subject to the provisions of the Income Tax Act. Other

Applicants can submit a certificate under section 197 of the Income Tax Act. For availing of the exemption

from deduction of tax at source from interest on Bonds the Applicant is required to submit Form 15G/ Form

15H certificate under section 197A of the Income Tax Act/ valid proof of exemption, as the case may be along

with the name of the sole/ first Applicant, Bondholder number and the distinctive numbers of Bonds held to us

on confirmation of Allotment. Applicants are required to submit Form 15G/ 15H/ certificate under section

197A of the Income Tax Act/ valid proof of exemption in each financial year.

13. All Applicants are requested to tick the relevant column “Category of Investor” in the Application Form.

14. Ensure that the Applications are submitted to the Bankers to the Issue or collection centre(s)/ agents as may be

specified before Issue Closing Date.

15. Ensure that the name(s) given in the Application Form is exactly the same as the name(s) in which the

beneficiary account is held with the Depository Participant. In case the Application Form is submitted in joint

names, ensure that the beneficiary account is also held in same joint names and such names are in the same

sequence in which they appear in the Application Form.

16. Tick the Series in the Application Form that you wish to apply for.

Don’ts:

1. Do not make an application for lower than the minimum Application size.

2. Do not pay the Application Amount in cash, by money order or by postal order or by stockinvest.

3. Do not send Application Forms by post; instead submit the same to a Bankers to the Issue / Designated

Collection Centre / Agent only.

4. Do not submit the GIR number instead of the PAN, as the Application Form is liable to be rejected on this

ground.

5. Do not submit the Application Forms without the full Application Amount for the number of Bonds applied

Page 153: Shelf Prospectus

151

for.

For further instructions, investors are advised to read the relevant tranche prospectus and Application Form carefully.

Applications for Allotment of Bonds in the physical form

Applicant(s) who wish to subscribe to, or hold, the Bonds in physical form can do so in terms of Section 8(1) of the

Depositories Act and the Company is obligated to fulfill such request of the Applicant(s). Accordingly, any Applicant

who wishes to subscribe to the Bonds in physical form shall undertake the following steps:

(i) Please complete the Application Form in all respects, by providing all the information including PAN

and demographic details. However, do not provide the Depository Participant details in the Application Form. The requirement for providing Depository Participant details shall be mandatory only for the Applicants

who wish to subscribe to the Bonds in dematerialised form.

(ii) Please provide the following documents along with the Application Form:

(a) Self-attested copy of the PAN card;

(b) Self-attested copy of the proof of residence. Any of the following documents shall be considered as a

verifiable proof of residence:

• ration card issued by the GoI; or

• valid driving license issued by any transport authority of the Republic of India; or

• electricity bill (not older than three months); or

• landline telephone bill (not older than three months); or

• valid passport issued by the GoI; or

• Voter’s Identity Card issued by the GoI; or

• passbook or latest bank statement issued by a bank operating in India; or

• leave and license agreement or agreement for sale or rent agreement or flat maintenance bill;

(c) Self-attested copy of a cancelled cheque of the bank account to which the amounts pertaining to

payment of refunds, interest and redemption, as applicable, should be credited.

The Applicant shall be responsible for providing the above information accurately. Delays or failure

in credit of the payments due to inaccurate details shall be at the sole risk of the Applicants and

neither the Lead Managers nor the Company shall have any responsibility and undertake any liability

for the same.

Applications for Allotment of the Bonds in physical form, which are not accompanied with the

aforestated documents may be rejected at the sole discretion of the Company.

In relation to the issuance of the Bonds in physical form, note the following:

(i) An Applicant has the option to seek Allotment of Bonds in either electronic or physical mode. No partial

Application for the Bonds shall be permitted and is liable to be rejected.

(ii) In case of Bonds that are being issued in physical form, the Company will issue one certificate to the

Bondholder for the aggregate amount of the Bonds that are applied for (each such certificate a “Consolidated

Bond Certificate”).

(iii) Any Applicant who provides the Depository Participant details in the Application Form shall be Allotted

the Bonds in dematerialised form only. Such Applicant shall not be Allotted the Bonds in physical form.

(iv) No separate Applications for issuance of the Bonds in physical and electronic form should be made. If such

Applications are made, the Application for the Bonds in physical mode shall be rejected. This shall be

considered as a ground for technical rejection.

(v) The Company shall dispatch the Consolidated Bond Certificate to the address of the Applicant provided in the

Application Form after completion of requisite procedure.

All terms and conditions disclosed in the relevant tranche prospectus in relation to the Bonds held in physical form

pursuant to rematerialisation shall be applicable mutatis mutandis to the Bonds issued in physical form.

Page 154: Shelf Prospectus

152

Subject to the lock-in for a minimum period of five years from the Deemed Date of Allotment, trading of the Bonds on

the Stock Exchange shall be in dematerialised form only in multiples of one Bond.

Applications for Allotment of Bonds in the dematerialised form

As per the provisions of the Depositories Act, the Bonds can be held in dematerialised form, i.e., they shall be fungible

and be represented by a statement issued through electronic mode. In this context, the Tripartite Agreements have been

executed between our Company, the Registrar to the Issue and the respective Depositories for offering depository

option to the Bondholders.

(a) All Applicants can seek Allotment in dematerialised mode or in physical form. Applications made for

receiving Allotment in the dematerialised form without relevant details of his or her depository account are

liable to be rejected.

(b) An Applicant applying for the Bonds must have at least one beneficiary account with either of the Depository

Participants of either of the Depositories, prior to making the Application.

(c) The Applicant must necessarily fill in the details (including the Beneficiary Account Number and Depository

Participant’s identification number) appearing in the Application Form.

(d) Allotment to an Applicant will be credited in electronic form directly to the beneficiary account (with the

Depository Participant) of the Applicant.

(e) Names in the Application Form should be identical to those appearing in the account details in the Depository.

In case of joint holders, the names should necessarily be in the same sequence as they appear in the account

details in the Depository.

(f) If incomplete or incorrect details are given under the heading ‘Applicant’s Depository Account Details’, in the

Application Form, it is liable to be rejected.

(g) The Applicant is responsible for the correctness of his or her demographic details given in the Application

Form vis-à-vis those with his or her Depository Participant.

(h) Bonds in electronic form can be traded only on the stock exchange having electronic connectivity with the

Depositories. BSE, where the Bonds are proposed to be listed, has electronic connectivity with the

Depositories.

(i) The trading of the Bonds shall be in dematerialised form only.

Allottees will have the option to re-materialise the Bonds so Allotted as per the provisions of the Companies Act

and the Depositories Act.

PAYMENT INSTRUCTIONS

Escrow Mechanism

The Company shall open Escrow Account(s) with one or more Escrow Collection Bank(s) in whose favour the

Applicants shall make out the cheque or demand draft in respect of his or her Application. Cheques or demand drafts

received for the Application Amount from Applicants would be deposited in the Escrow Account.

The Escrow Collection Banks will act in terms of the tranche prospectus(es) and the Escrow Agreement. The Escrow

Collection Banks, for and on behalf of the Applicants, shall maintain the monies in the Escrow Account until the

creation of security for the Bonds. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies

deposited therein and shall hold the monies therein in trust for the Applicants. On the Designated Date, the Escrow

Collection Banks shall transfer the funds represented by Allotment of the Bonds from the Escrow Account, as per the

terms of the Escrow Agreement, into the Public Issue Account maintained with the Bankers to the Issue, provided that

the sums received in respect of the Issue will be kept in the Escrow Account and the Company will have access to such

funds only after creation of security for the Bonds. The amount representing the Applications that have been rejected

shall be transferred to the Refund Account. Payments of refund to the Applicants shall be made from the Refund

Account are per the terms of the Escrow Agreement and the tranche prospectus(es).

The Applicants should note that the escrow mechanism is not prescribed by SEBI or the Stock Exchange and has been

Page 155: Shelf Prospectus

153

established as an arrangement between the Company, the Lead Managers, the Escrow Collection Banks and the

Registrar to the Issue to facilitate collection from the Applicants.

Payment into Escrow Account

Each Applicant shall draw a cheque or demand draft or remit the funds electronically through the mechanisms for the

Application Amount as per the following terms:

(a) All Applicants would be required to pay the full Application Amount for the number of Bonds applied for, at

the time of the submission of the Application Form.

(b) The Applicants shall, with the submission of the Application Form, draw a payment instrument for the full

Application Amount in favour of the Escrow Account and submit the same to Bankers to the Issue. If the

payment is not made favouring the Escrow Account along with the Application Form, the Application shall be

rejected.

(c) The payment instruments for payment into the Escrow Account should be drawn in favour of “PFC – Public

Bond Issue Account”.

(d) The monies deposited in the Escrow Account will be held for the benefit of the Applicants until the Designated

Date.

(e) On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account as per

the terms of the Escrow Agreement into the Public Issue Account with the Bankers to the Issue. The Escrow

Collection Bank shall also refund all amounts payable to Applicants whose Applications have been rejected by

the Company.

(f) Payments should be made by cheque, or a demand draft drawn on any bank (including a co-operative bank),

which is situated at, and is a member of or sub-member of the bankers’ clearing house located at the centre

where the Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in

the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are

liable to be rejected.

(g) Cash/ stockinvest/money orders/ postal orders will not be accepted.

Submission of Application Forms

All Application Forms duly completed and accompanied by account payee cheques or drafts shall be submitted to the

designated collection banks during the Issue Period.

No separate receipts shall be issued for the money payable on the submission of Application Form. However, the

collection banks will acknowledge the receipt of the Application Forms by stamping and returning to the Applicants the

acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Application Form for the records

of the Applicant.

Online Applications

The Company may decide to offer an online Application facility for the Bonds, as and when permitted by applicable

laws, subject to the terms and conditions prescribed.

Communications

All future communications in connection with Applications made in the Issue should be addressed to the Registrar to

the Issue, quoting all relevant details regarding the Applicant/Application. Applicants may address our Compliance

Officer as well as the contact persons of the Lead Managers and the Registrar to the Issue in case of any Issue related

problems such as non-receipt of allotment advice/credit of Bonds in the Depositary’s beneficiary account/refund orders,

etc.

Rejection of Applications

The Company reserves its full, unqualified and absolute right to accept or reject any Application in whole or in part and

in either case without assigning any reason thereof.

Page 156: Shelf Prospectus

154

Application would be liable to be rejected on one or more technical grounds, including but not restricted to:

• Number of Bonds applied for is less than the minimum Application size;

• Applications not duly signed by the sole/joint Applicants;

• Application amount paid not tallying with the number of Bonds applied for;

• Applications for a number of Bonds which is not in a multiple of one;

• Investor category not ticked;

• Bank account details not given;

• Applications by persons not competent to contract under the Indian Contract Act, 1872, as amended, including

a minor without a guardian name;

• In case of Applications under Power of Attorney where relevant documents not submitted;

• Application by stockinvest or accompanied by cash / money order / postal order; • Applications without PAN; and

• For option to hold Bonds in Physical form, Depository Participant identification number, Client ID and PAN

mentioned in the Application Form do not match with the Depository Participant identification number, Client

ID and PAN available in the records with the depositories;

• Address not provided in case of exercise of option to hold Bonds in physical form;

• Copy of KYC documents not provided in case of option to hold Bonds in physical form.

The collecting bank shall not be responsible for rejection of the Application on any of the technical grounds mentioned

above.

Application Forms received after the closure of the Issue shall be rejected.

In the event, if any Bond(s) applied for is/are not Allotted, the Application monies in respect of such Bonds will be

refunded, as may be permitted under the provisions of applicable laws.

Basis of Allotment

The Company shall finalise the Basis of Allotment in consultation with the Lead Managers, Designated Stock Exchange

and the Registrar to the Issue.

Subject to the provisions contained in the relevant tranche prospectus and the Articles of Association of the Company,

the Board or any other person(s) authorised by the Board will proceed to Allot the Bonds under the relevant tranche

prospectus on a first come first basis up to the Issue Closing Date, regardless of the Series of Bonds applied for.

However, in the event of oversubscription above ` 6,900 crores, for valid applications for the bonds received on the

date of oversubscription, the bonds shall be allotted proportionately, subject to the overall limit of ` 6,900 crores. Any

applications for bonds received after the date of oversubscription shall be rejected.

Allotment advice/ Refund Orders

The Company reserves, in its absolute and unqualified discretion and without assigning any reason thereof, the right to

reject any Application in whole or in part. The unutilised portion of the Application money will be refunded to the

Applicant by an account payee cheque/demand draft. In case the cheque payable at par facility is not available, we

reserve the right to adopt any other suitable mode of payment.

The Company shall credit the allotted Bond to the respective beneficiary accounts/dispatch the allotment advice/refund

orders, as the case may be, by registered post at the Applicant’s sole risk, within the period of 70 days prescribed under

Schedule II of the Companies Act.

Further,

(a) Allotment of the Bonds shall be made within 30 days of the Issue Closing Date;

(b) credit to dematerialised accounts will be made within two Working Days from the date of Allotment;

(c) the Company shall pay interest at 15% p.a. for delay beyond eight days prescribed under the Companies Act,

after the Company becomes liable to pay any amount on account of refund.

The Company will provide adequate funds to the Registrar to the Issue, for this purpose.

Filing of the tranche prospectus(es) with the RoC

Page 157: Shelf Prospectus

155

A copy of the tranche prospectus(es) shall be filed with the RoC, in accordance with the provisions of Sections 56 and

60 of the Companies Act.

Pre-Issue Advertisement

Subject to Section 66 of the Companies Act, the Company shall, on or before the Issue Opening Date, publish a pre-

Issue advertisement, in the form prescribed by the SEBI Debt Regulations, in one national daily newspaper with wide

circulation.

IMPERSONATION

Attention of the Applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the

Companies Act, which is reproduced below: “Any person who:

(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein,

or

(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in

a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”

Listing

The Bonds will be listed on BSE.

If the permission to deal in and for an official quotation of the Bonds are not granted by BSE, we shall forthwith repay,

without interest, all such moneys received from the Applicants in pursuance of the tranche prospectus(es). If such

money is not repaid within eight days after we becomes liable to repay it, then the Company and every Director of the

Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the money, with

interest at 15% p.a. on application money, as prescribed under Section 73 of the Companies Act.

The Company shall use best efforts to ensure that all steps for the completion of the necessary formalities for listing at

the Stock Exchange are taken within seven Working Days from the date of Allotment.

Utilisation of Application Money

The sums received in respect of the Issue will be kept in the Escrow Account and the Company will have access to such

funds only after creation of security for the Bonds.

Undertaking by the Issuer

We undertake that:

(a) the complaints received in respect of the Issue shall be attended to by us expeditiously and satisfactorily;

(b) we shall take necessary steps for the purpose of getting the Bonds listed within the specified time;

(c) the funds required for dispatch of refund orders/allotment advice/certificates by registered post shall be made

available to the Registrar to the Issue by the company;

(d) necessary cooperation to the credit rating agency(ies) shall be extended in providing true and adequate

information until the debt obligations in respect of the Bonds are outstanding;

(e) we shall forward the details of utilisation of the funds raised through the Bonds duly certified by our statutory

auditors, to the Debenture Trustee at the end of each half year;

(f) we shall disclose the complete name and address of the Debenture Trustee in our annual report; and

(g) we shall provide a compliance certificate to the Debenture Trustee (on an annual basis) in respect of

compliance of with the terms and conditions of issue of Bonds as contained in the tranche prospectus(es).

(h) We shall make necessary disclosures/ reporting under any other legal or regulatory requirement as may be

required by the company from time to time.

Page 158: Shelf Prospectus

156

SECTION VII - MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF THE COMPANY

Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main provisions of the Articles of

Association relating to voting rights, dividend, lien, forfeiture, restrictions on transfer and transmission of Equity Shares

or debentures and/or their consolidation/splitting are as detailed below. Please note that each provision herein below is

numbered as per the corresponding article number in the Articles of Association and defined terms herein have the

meaning given to them in the Articles of Association.

SHARE CAPITAL

Capital

4. The Authorised Share Capital of the company is ` 20,00,00,00,000 (Rupees Two thousand crores) divided into

2,00,00,00,000 (Two hundred crores) equity shares of ` 10/- (Rupees Ten) each.

Company’s Shares not to be purchased

5. Except to the extent allowed by Section 77, no part of the funds of the company shall be employed in the

purchase of or in loans upon the security of the company’s shares.

Buy Back of the Shares of the Company

5A. Notwithstanding, any thing contained in Article 5, the Company may buy back the shares of the Company to

the extent and in the manner allowed under Section 77A of the Companies Act, 1956.

Allotment of Shares

6. Subject to the provisions of Section 81 of the Act and these articles, the shares in the capital of the Company

for the time being shall be under the control of the Board of Directors who may issue, allot or otherwise

dispose of the same to such persons, in such proportions and on such terms and conditions and either at a

premium or at par or (Subject to the compliance with the provisions of Section 79 of the Act) at a discount and

at such time as they may from time to time think fit and subject to provisions of Section 77A of the Act with

the sanction of the company in the General Meeting to give to any person or persons the option or right to call

for any shares either at par or premium during such time and for such consideration as the Directors think fit,

and may issue and allot shares in the capital of the Company on payment in full or part of any property sold and

transferred or for any services rendered to the Company in the conduct of its business and any shares which

may so be allotted may be issued as fully paid-up shares and if so issued shall be deemed to be fully paid

shares.

Provided that option or right to call of shares shall not be given to any person or persons without the sanction of

the Company in General Meeting.

CERTIFICATES

Share Certificate

7. The Certificates of title to shares shall be issued in accordance with provision of the Companies (Issue of Share

Certificate) Rules, 1960.

Members right to Certificates

8. (i) Subject to the requirements of the listing agreement and the bye laws of the stock exchanges, every member

shall be entitled, without payment, to one or more certificates in marketable lots, for all the shares of each class

or denomination registered in his name, or if the directors so approve (upon paying such fees as the directors

may from time to time determine) to several certificates, each for one or more such shares and the Company

shall complete and have ready for delivery such certificates within three months from the date of allotment

unless the condition of issue thereof otherwise provide, or within one month of the receipt of application of

registration of transfer, transmission, sub-division, consolidation or renewal of any of its shares as the case

may be. Every certificate of share shall be under the seal of the Company and shall specify the number and

distinctive number of shares in respect of which it is issued and amount paid up thereon and shall be in such

form as the directors may prescribe or approve.

Page 159: Shelf Prospectus

157

Provided that in case of securities held by the member in dematerialized form no share certificate shall be

issued.

(ii) In respect of share or shares held jointly by several persons, the Company shall not be bound to issue more

than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient

delivery to all.

Issue of new share certificates in place of one defaced, lost or destroyed

9. If any security certificate be worn out, defaced, mutilated or torn or if there be no further space on the back

thereof for endorsement of transfer upon production and surrender thereof to the Company, a new certificate

may be issued in lieu thereof, and if any certificate be lost or destroyed then upon proof thereof to the

satisfaction of the Company and on execution of such indemnity as the Company deem adequate, being given,

a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed certificate. Every

certificate under the Articles shall be issued without payment of fees.

Provided that notwithstanding what is stated above the directors shall comply with such rules or regulations or

requirements of any stock exchange or the rules made under the Act or the rules made under Securities

Contracts (Regulation) Act, 1956 or any other Act, or rules applicable in this behalf.

The provision of this Article shall mutatis mutandis apply to the debentures of the Company.

CALLS

Calls on shares

10. The Board may, from time to time, make calls upon the members in respect of any moneys unpaid on their

shares and specify the time or times of payments, and each member shall pay to the Company at the time or

times so specified the amount called on his shares.

Provided, however, that the Board may, from time to time, at its discretion extend the time fixed for the

payment of any call and may extend such time to allow any of the members whom for residence at a distance or

other cause, the Board may deem entitled to such extension, but no member shall be entitled to such extension

save as a matter of grace and favour.

When interest on call payable.

11. If a sum payable in respect of any call be not paid on or before the day appointed for payment thereof the

holder for the time being or allottee of the share in respect of which a call shall have been made, shall pay

interest on the same at such rate not exceeding 5 (five) per cent per annum as the Board shall fix from the day

appointed for the payment thereof to the time of actual payment, but the Board may waive payment of such

interest wholly or in part.

Payment in anticipation of calls may carry interest.

12. The Directors may, if they think fit subject to the provision of section 92 of the Act, agree to and receive from

any member willing to advance the same, whole or any part of the moneys due upon the shares held by him

beyond the sums actually called for, and upon the amount so paid or satisfied in advance, or so much thereof as

from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance

has been made, the Company may pay interest at such rate, as may be decided by directors provided that

money paid in advance of calls shall not confer a right to participate in profits or dividend. The Directors may

at any time repay the amount so advanced.

The members shall not be entitled to any voting rights in respect of the moneys so paid by them until the same

would but for such payment, become presently payable.

The provisions of these Articles shall mutatis-mutandis apply to the calls on debentures of the Company.

Joint-holders’ liability to pay.

13. The joint-holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

FORFEITURE, SURRENDER AND LIEN

Page 160: Shelf Prospectus

158

Company’s Lien on shares

14. The Company shall have a first and paramount lien upon all the shares (other than fully paid-up shares and in

case of partly paid shares the Company’s lien shall be restricted to moneys called or payable at a fixed time in

respect of such shares) registered in the name of each member (whether solely or jointly with others) and upon

the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time

in respect of such shares and no equitable interest in any share shall be created except upon the footing and

condition that this Article will have full effect. Any such lien shall extend to all dividends, bonuses and interest

from time to time declared/accrued in respect of such shares. Unless otherwise agreed the registration of a

transfer of shares shall operate as a waiver of the Company’s lien, if any, on such shares/debentures. The

Directors may at any time declare any shares wholly or in part to be exempt from the provisions of this clause.

TRANSFER AND TRANSMISSION OF SHARES

Register of transfer.

21. The Company shall keep a book to be called register of transfers and therein enter the particulars of several

transfers or transmission of any share.

Transfer & Transmission of Shares

22. Subject to the provisions of the Listing Agreements between the Company and the Stock Exchange, in the

event that the proper documents have been lodged, the Company shall register the transfer of securities in the

name of the transferee except:

(i) When the transferee is, in exceptional circumstances, not approved by the Directors in accordance with the

provisions contained herein;

(ii) When any statutory prohibition or any attachment or prohibitory order of a competent authority restrains the

Company from transferring the securities out of the name of the transferor;

(iii) When the transferor object to the transfer provided he serves on the Company within a reasonable time a

prohibitory order of a court of competent jurisdiction.

Notice of refusal to register transfer

23. Subject to the provisions of Section 111 and 111A of the Act, the provisions of the Listing Agreements with the

Stock Exchange and Section 22A of the Securities Contracts (Regulation) Act, 1956, the Directors may, at their

own absolute and uncontrolled discretion and by giving reasons, decline to register or acknowledge any transfer

of shares whether fully paid or not and the right of refusal, shall not be affected by the circumstances that the

proposed transferee is already a member of the Company but in such cases, the Directors shall within one

month from the date on which the instrument of transfer was lodged with the Company, send to the transferee

and transferor a notice of the refusal to register such transfer provided that registration of transfer shall not be

refused on the ground of the transferor being either alone or jointly with any other person or persons indebted

to the Company on any account whatsoever except when the Company has a lien on the shares. Transfer of

shares/debentures in whatever lot shall not be refused.

Company not bound to recognize any interest in shares other than that of the registered holders.

24. Save as herein otherwise provided the Board shall be entitled to treat the person whose name appears on the

register of members as the holder of any share as the absolute owner thereof and accordingly shall not (except

as ordered by a court of competent jurisdiction or as by law required) be bound to recognize any benami trust

or equity or equitable contingent or other claim to or interest in such share on the part of any person, whether or

not it shall have express or implied notice thereof.

Execution of transfer

25. The instrument of transfer of any share in the Company shall be executed both by the transferor and the

transferee, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is

entered in the register of members in respect thereof.

Instrument of Transfer

Page 161: Shelf Prospectus

159

25A The instrument of transfer in case of shares held in physical form shall be in writing and all provisions of

section 108 of the Companies Act, 1956 and statutory modification thereof for the time being shall be duly

complied with in respect of all transfer of shares and registration thereof.

Form of transfer

26. A common form of transfer of shares or debentures as the case may be, shall be used by the Company.

Transfer to be left at office and evidence of title to be given

27. Every instrument of transfer shall be left at the office for registration accompanied by the certificate of the

shares to be transferred and such evidence as the Company may require to prove the title of the transferor, or his

right to transfer the shares. All instruments of transfer shall be retained by the company but any instrument of

transfer which the Board may decline to register shall be returned to the person depositing the same.

Transmission by operation of law.

28. Nothing contained in Article 22 shall prejudice any power of the company to register as shareholder any person

to whom the right to any shares in the company has been transmitted by operation of law.

Fee on transfer

29. No fee shall be charged for registration of transfer, transmission, probate, succession certificate and letters of

administration, certificate of death or marriage, power of attorney or similar other document.

When transfer books and register may be closed

30. The transfer books and register of members or register of debenture holders may be closed for any time or times

not exceeding in the aggregate 45 days in each year but not exceeding 30 days at a time, by giving not less than

seven days previous notice and in accordance with Section 154 of the Act.

Board’s right to refuse registration

31. Subject to the provision of Act, the Board shall have the same right to refuse to register a person entitled by

transmission to any shares or his nominee, as if he were the transferee named in the ordinary transfer presented

for registration.

INCREASE, REDUCTION AND ALTERATION OF CAPITAL

Transfer & Transmission of bonds/debentures

32. Unless otherwise provided the Act or rules made there under or any notification/ guidelines/ instructions/ of

the Govt. of India in that behalf, the procedures for transfer and transmission of shares shall mutatis mutandis

apply to transfer and transmission of debentures/bonds.

Nomination

32A. 1. Every Share/Bond/Debenture holder and a Depositor under the Company’s Public Deposit Scheme

(Depositor) of the company may at any time, nominate in the prescribed manner a person to whom his

Shares/Bonds/Debentures or deposits in the company shall vest in the event of his death.

2. Where the Shares or Bonds or Debentures or Deposits in the company are held by more than one person

jointly, the joint holder may together nominate, in the prescribed manner a person to whom all the rights in the

shares or bonds or debentures or deposits in the company as the case may be shall vest in the event of death of

all the joint holders.

3. Notwithstanding anything contained in any other law for the time being in force or in disposition, whether

testamentary or otherwise, in respect of such Shares/Bonds/Debentures or Deposits in the company, where

nomination made in the prescribed manner purport to confer on any person the right to vest the

share/bond/debentures or deposits in the company, the nominee shall on the death of the

Share/Bond/Debentures holder or a depositor, as the case may be, on the death of the joint holders become

entitled to all the rights in such shares/bonds/debentures or deposits, as the case may be, all the joint holders in

relation to such share/bonds/debentures or deposits, to the exclusion of all persons, unless the nomination is

Page 162: Shelf Prospectus

160

varied, cancelled in the prescribed manner.

4. Where the nominee is minor, it shall be lawful for the holder of the share/bonds/debentures or deposits, to

make the nomination to appoint, in the prescribed manner, any person to become entitled to

shares/bonds/debentures or deposits, in the company, in the event of his death, during the minority.

Transmission of securities by Nominee

32B. A nominee upon production of such evidence as may be required by the Board and subject as hereinafter

provide, elect, either-

1. to be registered himself as holder of the share/bonds/debentures or deposits, as the case may be; or

2. to make such transfer of the share/bonds/debentures or deposits, as the case may be, as deceased

share/bond/debenture holder or depositor, could have made;

3. if the nominee elects to be registered as holder of the share/bonds/debentures or deposits, himself, as the

case may be, he shall deliver or send to the company a notice in writing signed by him stating that he so

elects and such notice shall be compiled with the death certificate of the deceased share/bond/debenture

holder, or depositor, as the case may be;

4. a nominee shall be entitled ti the same dividends and other advantages to which he would be entitled to, if

he were the registered holder of the share/bond/debentures or deposits, except that he shall not, before

being registered as a member in respect of his share/bond./debenture or deposit be entitled in respect of it

to exercise any right conferred by membership in relation to meetings of the company.

Provided further that the Board may, at any time, give notice requiring any such person to elect either to be

registered himself or to transfer the share/bind/debenture or deposits, and if the notice is not complied with

within 90 days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable

or rights accruing in respect of the share/bond/debenture or deposits, until the requirements of the notice have

been complied with.

Increase of Capital

33. Subject to the provisions of the Act the Company in General Meeting, may increase the share capital by such

sum to be divided into shares of such amount as the resolution shall prescribe.

On what condition new shares may be issued

34. New shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto

as the general meeting resolving upon the creation whereof shall direct. Provided that no shares (not being

preference share) shall be issued carrying voting right or rights in the Company as to dividend, capital or

otherwise, which are disproportionate to the rights attaching to the holders of other shares (not being

preference shares).

How far new shares to rank with shares in original capital.

35. Except so far as otherwise provided by the conditions of issue, or by these articles, any capital raised by the

creation of new shares shall be considered part of the original capital and shall be subject to the provisions

herein contained with reference to the payment of calls and instalments, transfer and transmission, lien, voting,

surrender and otherwise.

New shares to be offered to members

36. The new shares (resulting from an increase of capital as aforesaid) may be issued or disposed of by the

directors to such persons and on such terms and conditions as they think fit.

Further issue of Shares

36A.1. Where at the time after the expiry of two years from the formation of the Company or at time after the expiry of

one year from the allotment of shares in the Company made for the first time after its formation, whichever is

earlier, it is proposed to increase the subscribed capital of the Company by allotment of further shares either

out of the unissued capital or out of the increased share capital then:

a) Such further shares shall be offered to the persons who at the date of the offer, are holders of the equity shares

of the Company, in proportion as near as circumstances admit, to the capital paid-up on that shares at the date.

Page 163: Shelf Prospectus

161

b) Such offer shall be made by a notice specifying the number of shares offered and limiting a time not being less

than thirty days from the date of the offer and the offer if not accepted, will be deemed to have been declined.

c) The offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the

shares offered to them in sub clause (b) hereof shall contain a statement of this right, provided that the

directors may decline, without assigning any reason to allot any shares to any person in whose favour any

member may renounce the shares offered to him.

d) After expiry of the time specified in the aforesaid notice or on receipt of earlier intimation from the person to

whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose off

them in such manner and to such person(s) as they may think, in their sole discretion, fit.

2. Notwithstanding anything contained in sub-clause (1) hereof, the further shares aforesaid may be offered to

any person (whether or not those persons include the persons referred to in clause (a) of sub-clause (1) hereof

in any manner whatsoever:

a) If a special resolution to that effect is passed by the Company in General Meeting, or

b) Where no such special resolution is passed, if the votes cast (whether on a show of hands or on a poll as the

case may be) in favour of the proposal contained in the resolution moved in the general meeting (including the

casting vote, if any, of the chairman) by the members who, being entitled to do so, vote in person, or where

proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members, so entitled and

voting and the Central Government is satisfied on an application made by the Board of Directors in this behalf

the proposal is most beneficial to the Company.

3. Nothing in sub-clause (c) of (1) hereof shall be deemed:

a) To extend the time within which the offer should be accepted; or

b) To authorize any person to exercise the right of renunciation for a second time on the ground that the person in

whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.

4. Nothing in this Article shall apply to the increase of the subscribed capital of the Company caused by the

exercise of an option attached to the debenture issued or loans raised by the Company:

i) To convert such debentures or loans into shares in the Company, or

ii) To subscribe for shares in the Company (whether such option is conferred in these Articles or otherwise)

Provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option

and such term

a) either has been approved by the Central Government before the issue of the debentures or the raising of the

loans or is in conformity with the rules, if any, made by that Government in this behalf; and

b) in the case of debentures or loan or other than debentures issued to or loans obtained from Government in this

behalf, has also been approved by a special resolution passed by the Company in General Meeting before the

issue of the debentures or raising of the loans.

Reduction of Capital etc.

37. Subject to provision of section 100-104 of the Act, the Company may, from time to time, by special resolution,

reduce its capital by paying off capital or cancelling capital which has been lost or is un-represented by

available assets or is superfluous or by reducing the liability on the shares or otherwise as may deem expedient,

and capital may be paid off upon the footing that it may be called upon again or otherwise, and the Board may,

subject to the provisions of the Act, accept surrender of shares.

Sub-division and consolidation of shares

38. Subject to the provisions of the Act, the Company in general meeting may, from time to time sub-divide or

consolidate its shares or any of them and exercise any of the other powers conferred by sub-section (i) (a) to

(e) of section 94 of the Act and shall file with the registrar such notice of exercise of any such powers as may

be required by the Act.

Page 164: Shelf Prospectus

162

De-materialization of securities

38A.a) Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize or

rematerialize its shares, debentures and other securities (both present and future) held by it with the Depository

and to offer its shares, debentures and other securities for subscription in a dematerialized form pursuant to the

Depositories Act, 1996 and the Rules framed thereunder, if any.

b) Every person subscribing to securities offered by the Company shall have the option to receive the security

certificate or to hold the securities with a Depository. Such a person who is the beneficial owner of securities

can at any time opt out of a Depository, if permitted by law, in respect of any security and the Company shall,

in the manner and within the time prescribed provided by the Depositories Act, 1996 issue to the beneficial

owner the required Certificates of Securities.

If a person opts to hold his security with a depository, then notwithstanding anything to the contrary contained

in the Act or in these Articles, the Company shall intimate such Depository the details of allotment of the

security and on receipt of the information, the Depository shall enter in its record the name of the allottee as

the beneficial owner of the security.

c) All securities held by a Depository shall be dematerialized and shall be in fungible form. Nothing contained in

Sections 153 of the Act shall apply to a Depository in respect of securities held by it on behalf of the beneficial

owners.

(d)(i) Notwithstanding anything to the contrary contained in the Act or in these Articles, a depository shall be

deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of

the beneficial owner.

(ii) Save as otherwise provided in (i) above, the Depository as the registered owner of the securities shall not have

any voting rights or any other rights in respect of the securities held by it.

(iii) Every person holding securities of the company and whose name is entered as the beneficial owner in the

records of the Depository shall be deemed to be a member/ debenture holder, as the case may be, of the

company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all

the liabilities in respect of his securities which are held by a Depository.

(a) Notwithstanding anything to the contrary contained in the Act or in these Articles to the contrary where

securities are held in a Depository, the records of the beneficial ownership may be served by such Depository

on the Company by means of electronic mode or by delivery of floppies or discs.

(b) Nothing contained in the Act or in these Articles, shall apply to a transfer or transmission of Securities where

the company has not issued any certificates and where such Shares or Debentures or Securities are being held

in a electronic and fungible form in a Depository. In such cases the provisions of the Depositories Act, 1996

shall apply.

(c) Notwithstanding anything to the contrary contained in the Act or these Articles, after any issue where the

securities are dealt with by a Depository, the company shall intimate the details thereof to the depository

immediately on allotment of such securities.

(d) Nothing contained in the Act or in these Articles regarding the necessity of having distinctive numbers for

securities issued by the Company shall apply to securities held by a Depository.

(iv) Notwithstanding anything contained in these Articles the Company shall have the right to issue Securities in a

public offer in dematerialized form as required by applicable laws and subject to the provisions of applicable

law, trading in the Securities of the Company post-listing shall be in the demat segment of the relevant Stock

Exchanges, in accordance with the directions of SEBI, the Stock Exchanges and the terms of the listing

agreements to be entered into with the relevant Stock Exchanges.

MODIFICATION OF CLASS RIGHTS

Power to modify rights of different classes of shareholders.

39. If at any time, the capital, by reason of the issue of preference shares or otherwise, is divided into different

classes of shares all or any of the rights and privileges attached to each class may, subject to the provisions of

Sections 106 and 107 of the Act be modified, abrogated or dealt with by agreement between the company and

Page 165: Shelf Prospectus

163

by any person purporting to contract on behalf of that class, provided such agreement is (a) ratified in writing

by the holder of at least three-fourth of the nominal value of the issued shares of that class or (b) confirmed by

a special resolution passed at a separate general meeting of the holders of shares of that class and all the

provisions hereinafter contained as to general meeting shall mutatis mutandis apply to every such meeting,

except that the quorum thereof shall be members holding or representing by proxy one-fifth of the nominal

amount of the issued shares of that class. This article is not by implication to curtail the power of modification

which the company would have if the article was omitted.

BORROWING POWERS

Power to borrow

40. Subject to the provisions of the act and regulations made there under, the Board of Directors may, from time to

time, by resolutions passed at a meeting of the Board, accept deposit, or borrow from the Members, either in

advance of calls or otherwise, or accept deposits from public and may raise and secured the payment of such

sum or sums in such manner and upon such terms and conditions in all respect as the think fit and in particular

by the issue of bonds, perpetual or redeemable debenture stock, or any mortgage or charge or other security on

the undertaking or the whole or any part of the property of the company (both present and future) including its

uncalled capital for the time being.

Subject to Section-76 of Companies Act, the Board may authorise payment of underwriting or such other

commission and brokerage as may be appropriate.

Securities may be assignable free from equities

41. Debenture, debenture stock, bond or other securities, may be made assignable free from any equities between

the Company and the persons to whom the same be issued.

Issue of debentures etc. at discount or with special privilege

42. Subject to section-117 of the act, any debenture, debenture stock, bond or other securities may issued at

discount, premium or otherwise, and with any special privilege as to redemption, surrender, drawings and

allotment of shares attending (but not voting) at the general meeting, appointment of directors and otherwise

debenture with the right to conversion into or allotment of shares shall be issued only with the consent of the

Company in the general meeting by a special resolution.

Persons not to have priority over any prior charge

43. Whenever any uncalled capital of the Company is charged all persons taking any subsequent charge thereon

shall taken the same subject to prior charge and shall not be entitled by notice to the shareholders or otherwise,

to obtain priority over such prior charge.

GENERAL MEETINGS

Annual General Meetings.

44. The first annual general meeting of the company shall be held within 18 months from the date of its

incorporation and thereafter the next general meeting of the company shall be held within 6 months after the

expiry of the financial year in which the first annual general meeting was held and thereafter an annual general

meeting shall be held by the company within 6 months after the expiry of each financial year, in accordance

with the provisions of Section 166 of the Act. Such general meetings shall be called “Annual General

Meetings”.

Extraordinary General Meetings.

45. All general meetings other than “Annual General Meetings” shall be called “Extraordinary General Meetings”.

The Board may whenever it thinks fit, and they shall when so required by the President or on the requisition of

the holders of not less than one tenth of the paid up share capital of the company upon which all calls or other

sums then due have been paid, forthwith proceed to convene an extraordinary general meeting of the company

and in case of such requisition the following provisions shall have effect:

(i) The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at

the office and may consist of several documents in like form each signed by one or more requisitionists.

Page 166: Shelf Prospectus

164

(ii) If the Board does not proceed within 21 days from the date of deposit of valid requisition to call a meeting on a

day not later than 45 days from such date the meeting may be called by such of the requisitionists as represent

either majority in value of the paid up share capital held by all of them or not less than one-tenth of such of the

paid up share capital of the company as is referred to in clause (a) of sub-section (4) of Section 169 of the Act

whichever is less.

(iii) Any meeting convened under this article by the requisitionists shall be convened in the same manner as nearly

as possible as that in which meetings are to be convened by the Board.

If, after a requisition has been received, it is not possible for a sufficient number of Directors to meet in time so

as to form a quorum, any Director may convene an extraordinary general meeting in the same manner as nearly

as possible as that in which meetings may be convened by the Board.

Notice of Meeting.

46.(a) A general meeting of the Company may be called by giving not less than 21 days’ notice in writing.

(b) A general meeting may be called after giving shorter notice than that specified in sub-clause (a) if consent is

accorded thereto:

(i) in the case of an annual general meeting by all the members entitled to vote thereat; and

(ii) in the case of any other meeting by members of the company holding not less than 95 per cent of such part of

the paid-up share capital of the company as gives a right to vote at the meeting.

Provided that where any members of the Company are entitled to vote only on some resolution or resolutions

to be moved at a meeting and not on the others, those members shall be taken into account for the purpose of

this sub-clause in respect of the former resolution or resolutions and not in respect of the latter.

Business at the Annual General Meeting.

54.(a) In the case of an Annual General Meeting, all business to be transacted at the meeting shall be deemed special,

with the exception of business relating to:

(i) the consideration of accounts, Balance Sheet and report of the Board of Directors and Auditors;

(ii) the declaration of a dividend;

(iii) the appointment of Directors in the place of those retiring; and

(iv) the appointment of, and the fixing of remuneration of the Auditors; and

(b) In the case of any other meeting all business shall be deemed special.

Explanatory statement to be annexed to the notice.

55.(i) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall

be annexed to the notice of the meeting a statement setting out all material facts concerning each item of

business, including in particular the nature of the concern or interest, if any, therein, of every Director, and the

Manager, if any.

Provided that where any item of special business as aforesaid to be transacted at a meeting of the company

relates to, or affects any other company, the extent of shareholding interest in that other company of every

Director, and Manager, if any, of the Company shall also be set out in the statement if the extent of such

shareholding interest is not less than twenty per cent of the paid-up share capital of that other Company.

(ii) Where any item of business consists of the according of approval to any document by the meeting, the time

and place where the document can be inspected shall be specified in the statement aforesaid.

Page 167: Shelf Prospectus

165

PROCEEDINGS AT GENERAL MEETINGS

Quorum

56.(i) No business shall be transacted at any general meeting unless a quorum of members is present at the time when

the meeting proceeds to business.

(ii) Five members present in person or by duly authorized representative shall be quorum for a General Meeting of

the Company.

Right of President to appoint any person as his representative.

57.(i) The President, so long as he is a shareholder of the company may, from time to time, appoint such person as he

thinks fit (who need not be member of the company) to represent him at all or any meetings of the company.

(ii) Any one of the persons appointed under sub-clause (i) of this article who is personally present at the meeting

shall be deemed to be member entitled to vote and be present in person and shall be entitled to represent the

President at all or any such meeting and to vote on his behalf whether on a show of hands or on a poll.

(iii) The President may, from time to time, cancel any appointment made under sub-clause (i) of this article and

make fresh appointments.

(iv) The production at the meeting of an order of the President, evidenced as provided in the Constitution of India,

shall be accepted by the company as sufficient evidence of any such appointment or cancellation as aforesaid.

(v) Any person appointed by the President under this article may, if so authorised by such order, appoint a proxy

whether specially or generally.

Chairman of general meeting.

58. The Chairman of the Board of Directors shall be entitled to take the chair at every general meeting or if there

be no such chairman, or if at any meeting he shall not be present within 15 minutes after the time appointed for

holding such meeting or is unwilling to act as chairman, the members present shall choose another Director as

chairman, and if no Director shall be present or, if all the Directors present decline to take the chair, then the

members present shall choose one of the members to be chairman.

Proceeding when quorum not present.

59. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if

convened upon any requisition of the members, shall be dissolved but in any other case it shall stand adjourned

to the same day in the next week not being a public holiday (but if the same be a public holiday the meeting

shall stand adjourned to the succeeding date of such public holiday) at the same time and place, or to such

other day and at such other time and place as the Board may determine and if at such adjourned meeting a

quorum is not present within half an hour from the time appointed for the meeting, those members who are

present shall be a quorum and may transact the business for which the meeting was called.

How questions to be decided at meetings.

60. Every question submitted to a meeting shall be decided in the first instance by a show of hands, and in the case

of an equality of votes the chairman shall, both on a show of hands and at a poll (if any), have a casting vote in

addition to the vote to which he may be entitled as a member.

What is to be evidence of the passing of resolution where poll not demanded.

61. At any general meeting resolution put to vote of the meeting shall be decided on a show of hands, unless a poll

is, before or on the declaration of the result of the show of hands, demanded by a member present in person or

proxy or by duly authorised representative, and unless a poll is so demanded, a declaration by the chairman

that resolution has, on a show of hands been carried or carried unanimously or by particular majority or lost,

and an entry to that effect in the book of proceedings of the company shall be conclusive evidence of the fact,

without proof of the number or proportion of the votes recorded in favour of or against that resolution.

Poll

Page 168: Shelf Prospectus

166

62. If a poll is duly demanded, it shall be taken in such manner and at such time and place as in accordance with

Sections 179 and 180 of the Act.

Power to adjourn general meeting.

63. The chairman of a general meeting may, with the consent of the meeting, adjourn the same from time to time

and from place to place but no business shall be transacted at any adjourned meeting other than the business

left unfinished at the meeting from which the adjournment took place.

In what cases poll taken without adjournment

64. Subject to the provisions of Section-180 of the Act, any poll duly demanded on the election of a chairman of a

meeting or any question of adjournment shall be taken at the meeting and without adjournment.

Business may proceed not withstanding demand of poll

65. The demand of a poll shall not prevent the continuation of a meeting for the transaction of any business other

than the question on which a poll has been demanded.

Chairman’s decision conclusive

66. The chairman of any meeting shall be the sole judge of the validity of every vote tendered at such meeting. The

chairman present at the taking of a poll shall be the sole judge of the validity of every vote tendered at such

poll.

VOTES OF MEMBERS

Votes

67. Every member entitled to vote and present in person or by proxy shall have one vote on a show of hands and

upon a poll one vote for each share held by him.

Postal Ballot

69A. Notwithstanding anything contained in the Articles of the Company, the Company do adopt the mode of

passing resolutions by the members of the Company by means of Postal Ballot (which includes voting by

electronic mode) and/or other ways as may be prescribed in the Companies (Passing of Resolutions by Postal

Ballot) Rules, 2001 in respect of the matters specified in said Rules as modified from time to time instead of

transacting such business in a general meeting of the company subject to compliances with the procedure for

such postal ballot and/or other requirements prescribed in the rules in this regard.

BOARD OF DIRECTORS

Number of Directors

80. Until otherwise determined in a general meeting the number of Directors of the company shall not be less than

three and not more than twelve. The Directors are not required to hold any qualification shares.

Appointment of Chairman, Managing Director and other Directors

81.(1) The President shall appoint one of the Directors as the Chairman and shall appoint other Directors in

consultation with the Chairman provided that no such consultation is necessary in respect of Government

representatives on the Board of Directors of the company. The Directors (including the Chairman/Managing

Director) shall be paid such salary and/or allowance as the President may from time to time determine.

(2) The President may from time to time appoint a Managing Director and other whole-time Director/ Directors on

such terms and remuneration (whether by way of salary or otherwise) as he may think fit.

(3) All the Directors of the Corporation except the Chairman, the Managing Director/whole-time Directors and the

Government representatives on the Board of Directors shall, unless otherwise specified in their order of

appointment, retire at the end of three years from the date of their appointment. The Directors so retired will be

eligible for reappointment.

Page 169: Shelf Prospectus

167

(4) Subject to the relevant provisions of the Act, the President shall have the right to remove or dismiss the

Chairman, the Managing Director/whole-time Director and the Directors for any reasons whatsoever and shall

have the right to fill in any vacancy in the office of the Chairman, Managing Director/whole-time Director or

the Directors caused by removal, dismissal, resignation, death or otherwise.

(5) Subject to the provisions of Section 292 of the Companies Act, the Board of Directors may, from time to time,

entrust and confer upon the Chairman or Managing Director for the time being such of the powers as they may

think fit and may confer such powers for such time and to be exercised for such objects and purposes and upon

such terms and conditions and with such restrictions as they may think expedient and may, from time to time,

revoke, withdraw, alter or vary all or any of such powers.

Disclosure of interest and interested Directors not to participate or vote in Board’s proceedings

82.(i) Every Director of the company shall disclose the nature of his concern or interest in accordance with the

provisions of Section 299 of the Act.

(ii) No Director of a company shall, as a Director, take any part in the discussion of or vote on, any contract or

arrangement entered into or to be entered into, by or on behalf of the company, if he is in any way, whether

directly or indirectly, concerned or interested in the contract or arrangement; nor shall his presence count for

the purpose of forming a quorum at the time of any such discussion or vote; and if he does vote, his vote shall

be void as provided in Section 300 of the Act.

Disqualifications of and vacating of office by Directors

83. A person shall not be capable of being appointed as a Director of the company if he suffers from any of the

disqualifications enumerated in Section 274 of the Act.

The office of a Director shall be vacated if any of the conditions set out in Section 283 of the Act comes to

happen. This is without prejudice to the right of the President to remove any Director without assigning any

reason whatsoever.

Alternate Director

84. The President may, in consultation with the Chairman of the company, and subject to Section 313 of the Act,

appoint an alternate Director to act for a Director during the absence of the Director from the State, in which

meetings of the Board are ordinarily held, for a period of not less than three months.

Powers of Chairman

85. (a) The Chairman shall reserve for the decision of the President any proposal or decision of the Board of Directors

in any matter which in the opinion of the Chairman is of such importance as to be reserved for the approval of

the President. No action shall be taken by the company in respect of any proposal or decision of the Board of

Directors reserved for approval of the President as aforesaid until his approval to the same has been obtained.

(b) Without prejudice to the generality of the other provisions contained in these Articles, the Board shall reserve

for the decision of the President any matter relating to:

(i) The Company’s revenue budget in case there is an element of deficit, which is proposed to be met by

obtaining funds from the Government.

(ii) Winding up of the Company.

(iii) Sale, lease, disposal or otherwise of the whole or substantially the whole of the undertaking of the

company.

(iv) Any other matter which in the opinion of the Chairman and Managing Director be of such importance

as to be reserved for the approval of the President.

Right of the President

86. Notwithstanding anything contained in all these Articles the President may from time to time issue such

directives or instructions as may be considered necessary in regard to conduct of business and affairs of the

company and in like manner may vary and annul any such directive or instruction. The Directors shall give

Page 170: Shelf Prospectus

168

immediate effect to the directives or instructions so issued. In particular, the President will have the powers:

(i) To give directives to the Company as to the exercise and performance of its functions in matters involving

national security or substantial public interest.

(ii) To call for such returns, accounts and other information with respect to the property and activities of the

company as may be required from time to time.

(iii) To determine in consultation with the Board annual, short and long term financial and economic objectives of

the Company.

Provided that all directives issued by the President shall be in writing addressed to the Chairman. The Board

shall except where the President considers that the interest of national security requires otherwise incorporate

the contents of directives issued by the President in the annual report of the Company and also indicate its

impact on the financial position of the Company.

General powers of the company vested in Directors

88. (i) Subject to the provisions of the Act and these articles, the Board of Directors of the company shall be

entitled to exercise all such powers and to do all such acts and things as the company is authorised to exercise

and do.

Provided that the Board shall not exercise any power or do any act or thing which is directed or required

whether by the Act or any other Act or by the Memorandum and Articles of the company in general meeting.

Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to

the provisions contained in that behalf in the Act or any other Act or in Memorandum and Articles of the

company, or in any regulations not inconsistent therewith and duly made there under, including regulations

made by the company in general meeting.

(ii) No regulation made by the company in general meeting shall invalidate any prior act of the Board which

would have been valid if that regulation had not been made.

RESERVE AND DIVIDEND

Division of Profit

101. (i) The profits of the Company available for payment of dividend subject to any special rights relating thereto

created or authorised to be created by these Articles of Association and subject to the provisions of the Act and

Articles of Association as to the reserve fund and amortisation of capital shall be divisible among the members

in proportion to the amount of capital paid-up by them respectively. Provided always that (subject as aforesaid)

any capital paid-up on a share during the period in respect of which a dividend is declared shall only entitle the

holder of such share to an apportioned amount of such dividend as from the date of payment.

(ii) No dividend shall be declared or paid by the company for any financial year except out of profits of the

company for that year arrived after providing for the depreciation in accordance with the provisions of sub--

section (2) of section 205 of the Act or out of profits of the company for any previous financial year or years

arrived after providing for the depreciation in accordance with applicable laws and remaining undistributed or

out of both or out of moneys provided by the government for the payment of dividend in pursuance of a

guarantee given by the government. No dividend shall carry interest against the company.

(iii) For the purpose of the last preceding article, the declaration of the directors as to the amount of the profits of

the company shall be conclusive.

(iv) Subject to the provisions of section 205 of the Act as amended, no dividend shall be payable except in cash.

(v) A transfer of shares shall not pass the right to any dividend declared thereon after transfer and before the

registration of the transfer.

(vi) Any one of the several persons who are registered as the joint holders of any share, may give effectual receipts

for all dividends and payments on accounts of dividends in respect of such shares.

(vii) Unless otherwise directed any dividend may be paid by cheque or demand draft or warrant or such other

Page 171: Shelf Prospectus

169

permissible means to the registered address of the member or person entitled or in the case of joint holding, to

the registered address of that one whose name stands first in the register in respect of joint holding and every

cheque, demand draft or warrant so sent shall be made payable to the member or to such person and to such

address as the shareholder or the joint shareholders in writing may direct.

The Company in General Meeting may declare a dividend

102. The company in General meeting may declare a dividend to be paid to the members according to their

respective rights and interest in the profits and may fix the time for payment but no dividend shall exceed the

amount recommended by the Board.

Interim Dividend

103. The Directors may, from time to time, pay to the members such interim dividends as in their judgement the

position of the Company justifies.

Unpaid or unclaimed dividend

103.A There shall not be any forfeiture of unclaimed dividends and the company shall comply with the applicable

provisions of the Act relating to transfer of unclaimed and unpaid dividend to the Investor Education and

Protection Fund or to any such other fund as may be required under applicable laws.

WINDING UP

Distribution of assets on winding up

113. If the company shall be wound up and the assets available for distribution among the members as such shall be

insufficient to repay the whole of the paid up capital, such assets shall be distributed so that as nearly as may

be the losses shall be borne by the members in proportion to the capital paid up or which ought to have been

paid up, at the commencement of the winding up of the shares held by them respectively. And if in a winding

up, the assets available for distribution among the members shall be more than sufficient to repay the whole of

the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the

members in proportion to the capital at the commencement of the winding up, paid up or which ought to have

been paid up on the shares held by them respectively. But this clause is to be without prejudice to the rights of

the holders of shares issued upon special terms and conditions.

Page 172: Shelf Prospectus

170

SECTION VIII – OTHER INFORMATION

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company

or entered into more than two years before the date of this Shelf Prospectus) which are or may be deemed material have

been entered or are to be entered into by the Company. These contracts and also the documents for inspection referred

to hereunder, may be inspected on Working Days at the Registered and Corporate Office of the Company situated at

‘Urjanidhi’, 1, Barakhamba Lane, Connaught Place, New Delhi 110 001, India, from 10.00 a.m. and 12.00 noon on any

working day (Monday to Friday) from the date during which issue is open for public subscription under the respective

tranches.

MATERIAL CONTRACTS

1. Memorandum of Understanding dated September 12, 2011 between the Company and the Lead Managers.

2. Memorandum of Understanding dated September 7, 2011 between the Company and the Registrar to the Issue.

3. Appointment Letter dated August 1, 2011 for the appointment of Debenture Trustee for the Bondholders.

4. Escrow Agreement dated September 21, 2011between the Company, the Registrar, the Escrow Collection

Bank(s), and the Lead Managers.

5. Tripartite Agreement dated April 25, 2006, between CDSL, the Company and the Registrar to the Issue.

6. Tripartite Agreement dated May 16, 2006 between NSDL, the Company and the Registrar to the Issue.

MATERIAL DOCUMENTS

1. Memorandum and Articles of Association of the Company, as amended to date.

2. Resolution passed at 281st Meeting of the Board of Directors held on March 17, 2011 approving the borrowing

programme of ` 27,500 crores for the year 2011-12 and authorizing the Chairman & Managing Director to

exercise powers in relation to raising of debt issues.

3. Board resolution dated September 12, 2011, approving the Issue and related matters.

4. Copy of shareholders resolution dated September 25, 2007 u/s 293 (1) (a) and 293 (1) (d) for borrowing limit

and creation of security respectively

5. Letter dated August 25, 2011 of CRISIL assigning ‘AAA/Stable’ (Pronounced ‘Triple A with stable outlook’)

raiting for our infrastructure bonds aggregating to ` 6,900 crores and letter dated September 7, 2011 of ICRA

assigning ‘AAA with a Stable outlook’ for our long-term infrastructure bonds of ` 6,900 crores (part of `

27,500 long term borrowings programmes for the financial year 2011-12).

6. Consents of each of the Directors, Lead Managers, Legal Advisors to the Issue, Registrar to the Issue, Bankers

to the Issue, Bankers to the Company, the Debenture Trustee for the Bonds and the Credit Rating Agencies to

include their names in the Shelf Prospectus, in their respective capacities.

7. Consent of the Auditors, for inclusion of their name and the report on the Accounts in the form and context in

which they appear in the Shelf Prospectus and their statement on tax benefits mentioned herein.

8. Auditor’s Report dated August 27, 2011 on unconsolidated financial statements prepared under Indian GAAP

for the financial year March 31, 2007, 2008, 2009, 2010 and 2011, and consolidated financial statements

prepared under Indian GAAP for the financial year 2009, 2010 and 2011.

9. Certificate dated September 12, 2011 issued by the Auditors on the amount and eligibility to carry out the Issue

of Infrastructure Bonds under section 80CCF of Income Tax Act, 1961, in terms of the Notification dated

September 9, 2011 of CBDT.

10. Annual Report of the Company for the last five Fiscals.

11. In-principle listing approval from BSE, through letter no. DCS/SP/PI-BOND001/11-12 dated September 22,

2011.

12. Due Diligence Certificate dated September 26, 2011 from each of the Lead Managers.

13. Due Diligence Certificate dated September 22, 2011 from the Debenture Trustee.

Any of the contracts or documents mentioned above may be amended or modified at any time, without reference

to the Bondholders, in the interest of the Company in compliance with applicable laws.

Page 173: Shelf Prospectus

171

DECLARATION

We, the Directors of the Company, certify that all applicable legal requirements in connection with the Issue, including

under the Companies Act, the SEBI Debt Regulations, and all relevant guidelines issued by SEBI, the Government of

India and any other competent authority in this behalf, have been duly complied with, and that no statement made in

this Shelf Prospectus contravenes such applicable legal requirements.

We further certify that this Shelf Prospectus does not omit disclosure of any material fact which may make the

statements made therein, in light of circumstances under which they were made, misleading and that all statements in

this Shelf Prospectus are true and correct.

Signed by all the Directors of the Company

1. Mr. Satnam Singh

2. Mr. Mukesh Kumar Goel

3. Mr. Rajeev Sharma

4. Mr. Radhakrishnan Nagarajan

5. Mr. Devender Singh

6. Mr. Ravindra Harshadrai Dholakia

7. Mr. P. Murali Mohana Rao

8. Mr. Suresh Chand Gupta

9 Mr. Ajit Prasad

10. Mr. Krishna Mohan Sahni

Place: New Delhi

Date: September 26, 2011

Page 174: Shelf Prospectus

ANNEXURE I

FINANCIAL STATEMENTS

Raj Har Gopal & Co. N.K.Bhargava & Co. Chartered Accountants, Chartered Accountants, 412, Ansal Bhawan, C-31, Ist Floor, Acharya Niketan, 16, K.G. Marg Mayur Vihar Phase-I New Delhi – 110 001 New Delhi – 110 091. Ph no.011 41520698,41520699 Ph no. 011 22752376 E-mail:[email protected] E-mail: [email protected]

AUDITORS’ REPORT The Board of Directors Power Finance Corporation Limited, “Urjanidhi”, 1, Barakhamba Lane, Connaught Place, New Delhi-110001 Dear Sir, Re: Proposed public issue by the Power Finance Corporation (“Issuer”) of Bonds (the “Bonds”) not exceeding aggregate amount of Rs. 6,900 Crores (the “Shelf limit”) by way of issuance of Bonds in one or more tranches (each a “Tranche Issue” and together all Tranche Issues up to the Shelf Limit, the “Issue”) 1. We have examined the financial information of POWER FINANCE CORPORATION LIMITED (the

“Company”) annexed to this report and initialed by us for identification purposes only. The said financial information has been prepared by the Company in accordance with the requirements of paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 (the “Act”) and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (“SEBI Regulations”) as amended issued by the Securities and Exchange Board of India, in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992, and related clarifications and in terms of our engagement agreed with you in accordance with our engagement letter dated 26th August, 2011 in connection with the Company’s Proposed Issue of secured, Redeemable, Non-Convertible Debentures, having Benefits Under Section 80CCF of the Income Tax Act, 1961.

2. Financial Information as per Audited Financial Statements

We have examined the attached ‘Statements of Assets and Liabilities’ of the Company for the financial year as at 31st March, 2007 to 31st March, 2011 (Annexure I), ‘Statement of Profits’ of the Company for the financial year from 31st March, 2007 to 31st March, 2011 (Annexure II), and ‘Statement of Cash Flows’ of the Company for the financial year from 31st March, 2007 to 31st March, 2011 (Annexure III), collectively referred to as ‘Audited Standalone Financial Information’. The Audited Standalone Financial Information have been extracted from the audited financial statements of the Company. The financial statements of the Company for the year ended 31st March 2011 have been audited by Raj Har Gopal & Co., Chartered Accountants jointly with Mehra Goel & Co., Chartered Accountants, for the year ended 31st March,2010 by Raj Har Gopal & Co., Chartered Accountants jointly with K.K. Soni & Co., Chartered Accountants, for the year ended March 31, 2009 by K.K. Soni & Co., Chartered Accountants and for the years ended 31st March , 2008 and 31st March, 2007 have been audited by Bansal Sinha & Co., Chartered Accountants and adopted by the members. Based on our examination of these Audited Financial Information, we state that:

i. These have to be read in conjunction with the Significant Accounting Policies and Notes to the

Accounts given in Annexure IV and V respectively to this report.

ii. The figures of earlier years / periods have been regrouped (but not restated retrospectively for change in any accounting policy), wherever necessary, to confirm to the classification adopted for the Audited Financial Information.

iii. There are no extraordinary items that need to be disclosed separately in the Audited Financial

Information.

iv There is no qualification in the auditor’s report on the Standalone financial statements for the year ended 31st March, 2011 that require adjustments to the Audited Financial Information.

Page 175: Shelf Prospectus

v. There are qualifications in the auditor’s report on standalone financial statements as on and for the year ended 31st March 2010 that require adjustments to the Audited Standalone Financial Information, which has not been given effect to, is as under:

a) “Power Finance Corporation Limited (The Company) pursuant to the opinion of the Expert

Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) provided “Deferred Tax Liability” (DTL) on special reserve created under section 36(1) (viii) of the Income Tax Act, 1961 in the year 2004-05, by charging Profit & Loss Account with Rs.142.87 crores and debiting the Free Reserves by Rs 745.14 crores (for creating DTL for the years 1997-98 to 2003-04). Since, then the Company continued to provide DTL till the end of March, 2008 by charging Profit & Loss Account. The total amount towards DTL upto 31st March, 2008 comes to Rs.1228.38 crores. The Company during the year 2008-09 reversed the DTL provided in earlier years amounting to Rs. 1228.38 crores and also did not provide DTL amounting to Rs. 291.21 crores (including Rs. 133.28 crores for the year 2008-09)in the current year, contrary to, opinions expressed by the EAC of the ICAI on two occasions dated 23.11.2004 and 18.05.2006, clarification furnished in July,2009 by the ICAI on the request of the Comptroller and Auditor General of India and mandatory provisions of Accounting Standard-22”

In view of the facts and circumstances placed before us, the profits and Free Reserves of the company are overstated by Rs 774.45 crores and Rs 745.14 crores (previous year Rs. 616.52 crores and Rs. 745.14 crores), respectively and DTL has been understated by Rs. 1519.59 crores (previous year Rs. 1361.66 crores).

b) As regards the liability of Rs.663.49 crores (previous year Rs.908.94 crores) shown as “Interest Subsidy Fund from GOI” in the Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from the Ministry of Power, Government of India, the Company has estimated the net excess amount of Rs.166.25 crores (previous year Rs.283.14 crores) and Rs. 209.97 crores (previous year Rs.44.27 crores) as at 31st March 2010, for IX and X plan respectively. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre payment, interest rate reset, etc. Hence, the impact of this excess, if any could not be determined. As such we are not in a position to express our opinion thereon.

vi. There are qualifications in the auditor’s report on standalone financial statements as on and for the year ended 31st March 2009 that require adjustments to the Audited Standalone Financial Information, which has not been given effect to, is as under:

a) Power Finance Corporation Limited (The Company) pursuant to the opinion of the Expert

Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) provided “Deferred Tax Liability” (DTL) on special reserve created under section 36(1) (viii) of the Income Tax Act, 1961 in the year 2004-05, by charging Profit & Loss Account with Rs.142.87 crores and debiting the Free Reserves by Rs 745.14 crores (for creating DTL for the years 1997-98 to 2003-04). Since, then the Company continued to provide DTL till the end of March, 2008 by charging Profit & Loss Account. The total amount towards DTL upto 31st March, 2008 comes to Rs.1228.38 crores. During the current year the Company has not provided the DTL amounting to Rs133.28 crores and has also reversed the DTL provided in earlier years amounting to Rs 1228.38 crores, contrary to the opinions expressed by the EAC of the ICAI (on two occasions dated 23.11.2004 & 18.05.2006) and contrary to the mandatory provisions of existing Accounting Standard- 22.

In view of the facts and circumstances placed before us, the profits and Free Reserves of the company are overstated by Rs 616.52 crores and Rs745.14 crores, respectively and DTL has been understated by Rs. 1361.66 crores.

b) As regards the liability of Rs.908.94 crores (previous year Rs.1066.75 crores) shown as “Interest

Subsidy Fund from GOI” in the Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from the Ministry of Power, Government of India, the Company has estimated the net excess amount of Rs.283.14 crores (previous year Rs.253.47 crores) and Rs.44.27 crores (previous year Rs.52.49 crores) as at 31st March 2009, for IX and X plan respectively. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre payment, interest rate reset, etc. Hence, the impact of this excess, if any could not be determined. As such we are not in a position to express our opinion thereon.

Page 176: Shelf Prospectus

vii. There are qualifications in the auditor’s report on standalone financial statements as on and for the year

ended 31st March 2008 that require adjustments to the Audited Standalone Financial Information , which has not been given effect to, is as under:

a) As regards the liability of Rs.1066.75 crores, shown as “Interest Subsidy Fund from GOI” in the

Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from Ministry of Power, Government of India, the corporation estimated the net excess amount of Rs. 253.47 crores and Rs. 52.49 crores as at 31/03/2008 for IXth & Xth plan respectively.This net excess amount is worked out on overall basis & not on individual basis & may vary due to change in assumptions, if any during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre payment, interest rate reset etc. Hence the impact of this excess, if any, could not be ascertained as such not commented upon.

b) Some of the balances shown under loans, advances and other debits/credits in so far as these have since not been confirmed, realised, discharged or adjusted are subject to reconciliation. The effect of above item Nos. (a) and (b) above on the Company’s accounts is not ascertainable for the reasons explained in the respective notes.

viii. There are qualifications in the auditor’s report on standalone financial statements as on and for the year

ended 31st March 2007 that require adjustments to the Audited Standalone Financial Information, which has not been given effect to, is as under:

a) As regards the liability of Rs.123162.90 lacs, shown as “Interest Subsidy Fund from GOI” in the

Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from Ministry of Power, Government of India, the excess/shortage in the Interest Subsidy Fund , if any, could not be ascertained as such not commented upon.

b) Some of the balances shown under loans, advances and other debits/credits in so far as these

have since not been confirmed, realised, discharged or adjusted are subject to reconciliation. The effect of above item Nos. (a) and (b) above on the Company’s accounts is not ascertainable for the reasons explained in the respective notes.

3. We have also examined the ‘Statements of Consolidated Assets and Liabilities’ of the Company for the financial years as at 31st March 2009 to 31st March, 2011 (Annexure XII), ‘Statement of Consolidated Profits’ of the Company for the financial year from 31st March 2009 to 31st March, 2011 (Annexure XIII), and ‘Statement of Consolidated Cash Flows’ of the Company for the financial year from 31st March 2009 to 31st March, 2011 (Annexure XIV), collectively referred to as ‘Audited Consolidated Financial Information’. The Audited Consolidated Financial Information have been extracted from the audited financial statements of the Company. The Consolidated financial statements for the year ended 31st March 2011 have been audited by Raj Har Gopal & Co., Chartered Accountants jointly with Mehra Goel & Co., Chartered Accountants, for the year ended 31st March, 2010 by Raj Har Gopal & Co., Chartered Accountants jointly with K.K. Soni & Co., Chartered Accountants and for the year ended March 31, 2009 by K.K. Soni & Co., Chartered Accountants and adopted by the members. Based on our examination of these Audited Consolidated Financial Information, we state that:

i. These have to be read in conjunction with the Significant Accounting Policies and Notes to the

Accounts given in Annexure XV and XVI respectively to this report.

ii. The figures of earlier years / periods have been regrouped (but not restated retrospectively for change in any accounting policy), wherever necessary, to confirm to the classification adopted for the Audited Financial Information.

iii. There are no extraordinary items that need to be disclosed separately in the Audited Financial

Information.

iv There is no qualification in the auditor’s report on the Consolidated financial statements for the year ended 31st March, 2011 that require adjustments to the Audited Consolidated Financial Information.

v. There are qualifications in the auditor’s report on the Consolidated financial statements for the year

ended 31st March 2010 that require adjustments to the Audited Consolidated Financial Information, which has not been given effect to, is as under:

a) Power Finance Corporation Limited (The Company) pursuant to the opinion of the Expert

Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) provided “Deferred Tax Liability” (DTL) on special reserve created under section 36(1) (viii) of the

Page 177: Shelf Prospectus

Income Tax Act, 1961 in the year 2004-05, by charging Profit & Loss Account with Rs.142.87 crores and debiting the Free Reserves by Rs 745.14 crores (for creating DTL for the years 1997-98 to 2003-04). Since, then the Company continued to provide DTL till the end of March, 2008 by charging Profit & Loss Account. The total amount towards DTL upto 31st March, 2008 comes to Rs.1228.38 crores. The Company during the year 2008-09 reversed the DTL provided in earlier years amounting to Rs. 1228.38 crores and also did not provide DTL amounting to Rs. 291.21 crores (including Rs. 133.28 crores for the year 2008-09 )in the current year, contrary to, opinions expressed by the EAC of the ICAI on two occasions dated 23.11.2004 and 18.05.2006, clarification furnished in July,2009 by the ICAI on the request of the Comptroller and Auditor General of India and mandatory provisions of Accounting Standard-22. In view of the facts and circumstances placed before us, the Profits and Free Reserves of the Company are overstated by Rs 774.45 crores and Rs 745.14 crores (previous year Rs. 616.52 crores and Rs. 745.14 crores), respectively and DTL has been understated by Rs. 1519.59 crores (previous year Rs. 1361.66 crores).

b) As regards the liability of Rs.663.49 crores (previous year Rs.908.94 crores) shown as “Interest Subsidy Fund from GOI” in the Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from the Ministry of Power, Government of India, the Company has estimated the net excess amount of Rs.166.25 crores (previous year Rs.283.14 crores) and Rs. 209.97 crores (previous year Rs.44.27 crores) as at 31st March 2010, for IX and X plan respectively. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre payment, interest rate reset, etc. Hence, the impact of this excess, if any could not be determined. As such we are not in a position to express our opinion thereon.

vi There are qualifications in the auditor’s report on Consolidated financial statements as on and for the

year ended 31st March 2009 that require adjustments to the Audited Consolidated Financial Information, which has not been given effect to, is as under:

a) Power Finance Corporation Limited (The Company) pursuant to the opinion of the Expert

Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) provided “Deferred Tax Liability” (DTL) on special reserve created under section 36(1) (viii) of the Income Tax Act, 1961 in the year 2004-05, by charging Profit & Loss Account with Rs.142.87 crores and debiting the Free Reserves by Rs 745.14 crores (for creating DTL for the years 1997-98 to 2003-04). Since, then the Company continued to provide DTL till the end of March, 2008 by charging Profit & Loss Account. The total amount towards DTL upto 31st March, 2008 comes to Rs.1228.38 crores. During the current year the Company has not provided the DTL amounting to Rs.133.28 crores and has also reversed the DTL provided in earlier years amounting to Rs 1228.38 crores, contrary to the opinions expressed by the EAC of the ICAI (on two occasions dated 23.11.2004 & 18.05.2006) and contrary to the mandatory provisions of existing Accounting Standard- 22.

In view of the facts and circumstances placed before us, the profits and Free Reserves of the company are overstated by Rs 616.52 crores and Rs745.14 crores, respectively and DTL has been understated by Rs 1361.66 crores.

b) As regards the liability of Rs.908.94 crores (previous year Rs.1066.75 crores) shown as “Interest

Subsidy Fund from GOI” in the Balance Sheet, received under Accelerated Generation and Supply Program (AG&SP) Scheme from the Ministry of Power, Government of India, the Company has estimated the net excess amount of Rs.283.14 crores (previous year Rs.253.47 crores) and Rs.44.27 crores (previous year Rs.52.49 crores) as at 31st March 2009, for IX and X plan respectively. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre payment, interest rate reset, etc. Hence, the impact of this excess, if any could not be determined. As such we are not in a position to express our opinion thereon.

4. We have examined these financial statements (standalone as well as consolidated) taking into consideration

the guidance note on reports in company prospectus (Revised) issued by the Institute of Chartered Accountants of India, except that these financial statements have not been adjusted for changes in accounting policies retrospectively in the respective financial years to reflect the same accounting policies for all the reporting periods and for adjustments of amounts pertaining to previous years in the respective financial years to which they relate.

Page 178: Shelf Prospectus

5. Other Financial Information of the Company: We have examined the following information relating to the Company as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 proposed to included in the Prospectus as approved by the Board of Directors annexed to this report:

i. Significant Accounting Policies on the Audited Standalone Financial Statements as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 (Annexure IV)

ii. Significant Notes to Accounts on the Audited Standalone Financial Statements as at and for each of the

years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 (Annexure V)

iii. Related Party Information as at and for each of the years ended 31st March, 2011, 31st March, 2010,

31st March 2009, 31st March 2008 and 31st March 2007 (Annexure VI)

iv. Statements of Accounting Ratios as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 (Annexure VII)

v. Statement of the Dividend as at and for each of the years ended 31st March, 2011, 31st March, 2010,

31st March 2009, 31st March 2008 and 31st March 2007 (Annexure VIII)

vi. Statement of Tax Shelter as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 (Annexure IX)

vii. Capitalization statement as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st

March 2009, 31st March 2008 and 31st March 2007 (Annexure X)

viii. Details of Contingent Liabilities as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 (Annexure XI)

ix. Significant Accounting Policies on the Audited Consolidated Financial Statements as at and for each of

the years ended 31st March, 2011, 31st March, 2010 and 31st March 2009 (Annexure XV)

x. Significant Notes to Accounts on the Audited Consolidated Financial Statements as at and for each of the years ended 31st March, 2011, 31st March, 2010 and 31st March 2009. (Annexure XVI)

xi. Related Party Information (Consolidated) as at and for each of the years ended 31st March, 2011, 31st

March, 2010 and 31st March 2009.(Annexure XVII )

xii. Statements of Accounting Ratios (Consolidated) as at and for each of the years ended 31st March, 2011, 31st March, 2010 and 31st March 2009 (Annexure XVIII)

xiii. Capitalization statement (Consolidated) as at and for each of the years ended 31st March, 2011, 31st

March, 2010 and 31st March 2009 (Annexure XIX)

xiv. Details of Contingent Liabilities (Consolidated) as at and for each of the years ended 31st March, 2011, 31st March, 2010 and 31st March 2009 (Annexure XX)

6. Based on our examination of these Audited Financial Information, we state that in our opinion, the ‘Financial

Information as per the Audited Financial Statements’ and ‘Other Financial Information’ of the Company mentioned above, as at and for each of the years ended 31st March, 2011, 31st March, 2010, 31st March 2009, 31st March 2008 and 31st March 2007 have been prepared in accordance with Part II B of Schedule II of the Act and the SEBI Regulations.

7. This report should not, in any way, be construed as a reissuance or redating of any of the previous audit

reports nor should this be construed as a new opinion on any of the financial statements referred to herein. 8. This report is intended solely for your information and for inclusion in the Letter of Offer, in connection with

the Proposed Issue of Secured, Redeemable, Non-Convertible Debentures, having Benefits Under Section 80CCF of the Income Tax Act, 1961 and is not to be used, referred to or distributed for any other purpose without our prior written consent.

Page 179: Shelf Prospectus

9. We have no responsibility to update our report for events and circumstances occurring after the date of the report for the financial position, results of operations or cash flows of the company as of any date or year subsequent to March 31st, 2011.

For Raj Har Gopal & Co. For N.K.Bhargava & Co. Chartered Accountants Chartered Accountants Firm’s Regn. No.: 002074N Firm’s Regn. No.: 000429N G.K. Gupta N.K.Bhargava Partner Partner Membership no. 81085 Membership no.080624

Place: New Delhi Date: 27.08.2011

Page 180: Shelf Prospectus

ANNEXURE - I POWER FINANCE CORPORATION LIMITED

Statement of Assets & Liabilities

Description Schedule Number

As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

I . SOURCES OF FUNDS

(1) Share Holder's Funds

(a) Share Capital 1 1147.77 1147.77 1147.77 1147.77 1147.77

(b) Reserves & Surplus 2 14034.72 12113.02 10360.05 8182.08 7445.32

15182.49 13260.79 11507.82 9329.85 8593.09

(2) Loan Funds 3 Secured Loans 235.36 0.00 0.00 0.00 0.00

Unsecured Loans 85363.21 67108.41 52160.15 40647.81 33584.18

85598.57 67108.41 52160.15 40647.81 33584.18

(3) Interest Subsidy Fund from GOI 451.87 663.49 908.94 1066.75 1231.63

(4) Deferred Tax Liablity (Net of Asset ) 82.97 46.95 55.48 1240.25 1142.59

Total 101315.90 81079.54 64632.39 52284.66 44551.49

II . APPLICATION OF FUNDS

(1) Fixed Assets 4

Gross Block 98.94 93.21 97.33 374.86 375.84

Less : Depreciation / Amortization 24.51 20.44 22.18 297.86 294.39

Net Block 74.43 72.77 75.15 77.00 81.45

Capital Works in Progress 2.28 1.73 0.00 0.00 0.00

(2) Investments 5 53.88 31.43 35.86 65.59 58.88

(3) Loans 6 99570.74 79855.76 64428.99 51568.31 43902.83

(4) Net Current Assets

Current Assets, Loans & Advances - (A) 7

(a) Cash & Bank Balances 2350.26 1394.30 392.23 695.33 507.67

(b) Other Current Assets 1941.87 1592.76 1340.57 1055.86 1106.11

(c) Loans & Advances 640.58 491.12 445.87 209.80 282.95

4932.71 3478.18 2178.67 1960.99 1896.73

Less : Current Liabilities & Provisions - (B)

8

(a) Current Liabilites 3021.47 2124.52 1860.59 1216.22 1187.87

(b) Provisions 296.87 235.71 225.69 171.01 200.53

3318.34 2360.23 2086.28 1387.23 1388.40

Page 181: Shelf Prospectus

Net Current Assets (A) - (B) 1614.37 1117.95 92.39 573.76 508.33

(6) MISCELLANEOUS EXPENDITURE

(To the extent not written-off)

Miscellaneous Expenses 0.20 0.00 0.00 0.00 0.00

Total 101315.90 81079.64 64632.39 52284.66 44551.49

Page 182: Shelf Prospectus

ANNEXURE - II

POWER FINANCE CORPORATION LIMITED

Statement of Profits

(Rs. in crore)

Description Schedule Number

Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

INCOME Operating Income 9 10128.49 8002.10 6557.37 5029.28 3816.67 Other Income 10 32.07 74.76 26.17 10.76 9.42 Exchange Risk Management Account written back 101.56

Total 10160.56 8076.86 6583.54 5040.04 3927.65 EXPENSES Interest and other charges 11 6423.90 4912.24 4432.92 3143.74 2334.77 Bond Issue Expenses 12 63.05 43.79 65.68 38.82 33.23 Personnel & Administration and Other Expenses

13 92.62 106.04 86.71 81.24 53.84

Depreciation 4 4.28 3.38 3.84 4.48 3.77 Amortization of Intangible Assets 4 0.77 0.43 0.28 0.02 0.02

Provision for Contingencies 31.79 -0.57 2.17 -10.21 -4.85

Provision for decline in value of investments -0.06 -1.52 1.49 -0.24 -0.01

Total 6616.35 5063.79 4593.09 3257.85 2420.77 Profit for the year 3544.21 3013.07 1990.45 1782.19 1506.88 Less(-) / Add(+) : Prior Period adjustments 14 -0.07 0.13 0.02 5.21 -0.02

Profit before tax 3544.14 3013.20 1990.47 1787.40 1506.86 Less(-) / Add(+) : Provision for Taxation - Current Year :- - Tax -898.99 -800.27 -492.02 -481.98 -333.54 - Earlier Years :- - Tax 10.45 135.79 32.61 -0.04 -14.31 Less / Add : Deferred tax liability(-) / Asset(+) - Current Year -36.02 8.53 -43.61 -97.65 -172.05 - Reversal of DTL of Earlier Years 483.24 Less(-) / Add(+) : Provision for fringe benefit tax 0.00 0.00 -0.73 -0.97 -0.82

Profit after tax available for appropriations 15 2619.58 2357.25 1969.96 1206.76 986.14

Page 183: Shelf Prospectus

SCHEDULE - 1

SHARE CAPITAL (Rs. in crore)

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

Authorised :

200,00,00,000 Equity shares of Rs.10/- each 2000.00 2000.00 2000.00 2000.00 2000.00

Issued, subscribed and paid up :

114,77,66,700 Equity shares of Rs.10/- each fully paid-up 1147.77 1147.77 1147.77 1147.77 1147.77

TOTAL 1147.77 1147.77 1147.77 1147.77 1147.77

SCHEDULE - 2

RESERVES & SURPLUS (Rs. in crore)

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

Reserve for Bad & doubtful debts u/s 36(1)(viia)(c) of Income-Tax Act,1961

Opening balance 842.07 718.15 641.69 550.72 472.20 Add : Transfer from Profit & Loss Account 142.47 123.92 76.46 90.97 78.52

Add : Transfer from Surplus in Profit & Loss Account * 0.34 0.00 0.00 0.00 0.00

984.88 842.07 718.15 641.69 550.72

Special Reserve created u/s 36(1)(viii) ofIncome Tax Act, 1961 upto Financial Year 1996-97 599.85 599.85 599.85 599.85 599.85

Special Reserve created and maintained u/s 36(1)(viii) of Income Tax Act, 1961 from Financial Year 1997-98

Opening balance 4574.64 4006.03 3613.94 3302.10 2800.63 Add : Transfer from Profit & Loss Account 634.32 568.61 346.23 311.84 501.47 Add : Transfer from Surplus in Profit & Loss Account * 0.27 0.00 45.86 0.00 0.00 Add : Transfer from Profit & Loss Account (Balance Sheet head) *** 7.92 0.00 0.00 0.00 0.00 Less: Transfer to Surplus in Profit & Loss Account **** 12.83 0.00 0.00 0.00 0.00

Page 184: Shelf Prospectus

5204.32 4574.64 4006.03 3613.94 3302.10

Securities Premium Account Opening balance 851.10 851.10 851.10 851.10 0.00 Add : Proceeds on Issue of shares (IPO) 879.88 Less : IPO expenses 28.78

851.10 851.10 851.10 851.10 851.10

General Reserve Opening balance 2031.97 1795.97 1615.41 1494.41 1395.41 Add : Transfer from Profit & Loss Account 262.00 236.00 197.00 121.00 99.00 Less : Transfers to Special Reserve under Income Tax Act, 1961 0.00 0.00 16.44 0.00 0.00

2293.97 2031.97 1795.97 1615.41 1494.41

Debeture Redemption Reserve Opening balance 0.00 0.00 0.00 0.00 0.00 Add : Transfers from Profit & Loss Account 0.06 0.00 0.00 0.00 0.00

0.06 0.00 0.00 0.00 0.00

Surplus in Profit and Loss Account Opening balance 3213.39 2388.95 860.09 647.14 639.62 Add : Transfer from Profit & Loss Account 882.18 824.44 813.14 212.95 7.52 Add : Adjustments during the current year ** 0.67 0.00 745.14 0.00 0.00 Add : Transfers from Special Reserve under Income Tax Act, 1961 **** 12.83 0.00 0.00 0.00 0.00

Less : Transfers to Reserve for Bad & doubtful debts and Special Reserve under Income Tax Act, 1961 * 0.61 0.00 29.42 0.00 0.00 Less : Transfers to Special Reserve under Income Tax Act, 1961 *** 7.92 0.00 0.00 0.00 0.00

4100.54 3213.39 2388.95 860.09 647.14

TOTAL 14034.72 12113.02 10360.05 8182.08 7445.32

* Transferred to match the deduction claimed as per the Income tax return for the Assessment Year 2010-11. ** On account of reversal of excess corporate dividend tax provided for during the FY 2009-10. *** Additional special reserve created for AY 2009-10 to match with our claim as per revised return . **** Surplus special reserve has been reversed due to pre payment of loans before five years .

Note : All the notes mentioned above pertain to the Financial Year 2010-11.

SCHEDULE - 3

LOAN FUNDS

(Rs. in crore)

Page 185: Shelf Prospectus

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

A Secured

I. Bonds

a) Infrastructure Bonds (Refer Note 1) 235.36 0.00 0.00 0.00 0.00

Sub Total - A 235.36 0.00 0.00 0.00 0.00

B Unsecured

I. Bonds

a) Bonds Guaranteed by the Government of India (Refer Note 2)

22.00 42.00 62.00 82.00 96.51

b) Other Bonds (Refer Note 3 to 13) 55879.64 45759.43 35417.15 23461.27 16315.36

c) Foreign Currency Notes (Refer Note 15) 812.52 820.44 1402.42 1186.96 468.63

56,714.16 46,621.87 36,881.57 24,730.23 16,880.50

II. Loans

a) Long Term Loans (Refer Note 16)

(i)

Foreign Currency Loans from Foreign banks / Institutions ( Guaranteed by the Govt. of India )

331.54 389.04 505.28 479.69 484.95

(ii) Syndicated Foreign Currency Loans from banks / Institutions 3637.91 1367.40 476.00 406.95 903.87

(iii)

Foreign Currency Loans ( FCNR(B) from banks ) 180.56 181.98 205.80 160.44 65.65

(iv)

Rupee Term Loans ( From Banks ) 17078.00 14793.00 11891.50 11240.50 11613.21

(v) Rupee Term Loans ( From Financial Institutions ) 1130.00 1430.00 800.00 1150.00 1325.00

22,358.01 18,161.42 13,878.58 13,437.58 14,392.68

b) Short Term Loans

(i) Rupee Term Loans ( From Banks ) 2100.00 0.00 400.00 2480.00 1840.00

(ii) Rupee Term Loans ( From Financial Institutions ) 0.00 0.00 0.00 0.00 100.00

Page 186: Shelf Prospectus

(iii)

Foreign Currency Loans ( FCNR(B) from banks ) 0.00 0.00 0.00 0.00 0.00

(iv) Commercial Paper 1950.00 650.00 1000.00 0.00 200.00

(v) Working Capital Demand Loan/OD/CC/Loan Against FD/Line of Credit

2241.04 1675.12 0.00 0.00 171.00

6,291.04 2,325.12 1,400.00 2,480.00 2,311.00

Sub Total - B 85363.21 67108.41 52160.15 40647.81 33584.18

Total (A + B) 85598.57 67108.41 52160.15 40647.81 33584.18

Notes to Schedule 3 (pertaining to Loans outstanding as at 31.03.2011) :

1 The details of Infrastructure Bonds outstanding as at 31.03.2011 are as follows:

Bond Series Date of allotment

Amount (Rs. in crore)

Redemption details

Infrastructure Bonds Series-1

31.03.2011 66.84

They are redeemable at par, one date, being the date falling ten years from the Date of allotment and / or are redeemable at par, one date, being the date falling five years and one day from the Date of Allotment on exercising the put option by the bondholders.

Infrastructure Bonds Series-2

31.03.2011 139.67

They are redeemable at par with cumulative interest and interest on application interest compounded annually, one date, being the date falling ten years from the date of allotment and / or are redeemable at par with cumulative interest and interest on application interest compounded annually, one date, being the date falling five years and one day from the date of allotment on exercising the put option by the bondholders.

Infrastructure Bonds Series-3

31.03.2011 6.13

They are redeemable at par, one date, being the date falling fifteen years from the date of allotment and / or are redeemable at par, one date, being the date falling seven years and one day from the date of allotment on exercising the put option by the bondholders.

Infrastructure Bonds Series-4

31.03.2011 22.72

They are redeemable at par with cumulative interest and interest on application interest compounded annually, one date, being the date falling fifteen years from the date of allotment and / or are redeemable at par with cumulative interest and interest on application interest compounded annually, one date, being the date falling seven years and one day from the date of allotment on exercising the put option by the bondholders.

2 The details of Government guaranteed bonds outstanding as at 31.03.2011 are as follows:

Bond Series Amount (Rs. in crore)

Date of Redemption

12.00 % Bonds - IV Series

22.00 10.02.2012

Page 187: Shelf Prospectus

3 9.70% Taxable Unsecured redeemable bonds 2011 - X Series of Rs.354.00 crore are issued with separately transferable redeemable principal parts (STRPP) with each bond bearing a total face value of Rs.1,00,00,000 each comprising 7 detachable and separately transferable principal parts - I and VII parts of Rs.15,00,000/- each and II to VI parts of Rs.14,00,000/- each. The separate principal parts are designated as A,B,C,D,E,F and G. Parts A,B,C, D, E & F amounting to Rs.53.10 crore, Rs.49.56 crore, Rs.49.56 crore, Rs.49.56 crore, 49.56 crore & Rs. 49.56 crore respectively have been redeemed on 23.11.2005, 23.11.2006, 23.11.2007, 23.11.2008, 23.11.2009 & 23.11.2010 respectively. The separate principal parts designated as F and G will be redeemed at par as follows:

PART Date of Redemption Amount (Rs. in crore)

G 23.11.2011 53.10

4 9.25% Taxable non-cummulative Unsecured redeemable Bonds 2012- XI Series of Rs.774.97 crore have been alloted on 20.02.2002. They are redeemable at par on the expiry of 10 years from the date of allotment and / or are redeemable at par after expiry of 7 years on exercising the put or call option by the bondholders or by the Company. Put option for Rs.30.89 crore has been exercised by the bondholders on 20.02.2009.

5 9.60% Taxable non-cummulative Unsecured redeemable Bonds 2017 - XIII Series of Rs. 125.00 crore and

Rs.65.00 crore have been alloted on 16.5.2002 and 24.5.2002 respectively. They are redeemable at par on the expiry of 15 years from the date of allotment.

6 8.21% Taxable non-cummulative Unsecured redeemable Bonds 2017 - XVII Series of Rs. 250.00 crore have been

alloted on 03.10.2002. They are redeemable in 10 equal annual instalments beginning from the date next to the expiry of the 6th year after an initial moratorium period of 5 years from the date of allotment. An amount of Rs.25.00 crore each amounting to Rs. 75 crore was redeemed on 03.10.2008 , 03.10.2009 and 03.10.2010 respectively. The date and the amount of the bonds to be redeemed are as follows :-

Date of Redemption

Amount (Rs. in crore)

3.10.2011 25.00 3.10.2012 25.00 3.10.2013 25.00 3.10.2014 25.00 3.10.2015 25.00 3.10.2016 25.00 3.10.2017 25.00

7 7.87% Taxable non-cummulative Unsecured redeemable Bonds 2017 - XVIII Series of Rs. 250.00 crore have been alloted on 13.11.2002. They are redeemable in 10 equal annual instalments beginning from the date next to the expiry of the 6th year after an initial moratorium period of 5 years from the date of allotment. An amount of Rs.25.00 crore each amounting to Rs. 75 crore was redeemed on 13.11.2008, 13.11.2009 & 13.11.2010 respectively . The date and the amount of the bonds to be redeemed are as follows :-

Date of Redemption

Amount (Rs. in crore)

13.11.2011 25.00 13.11.2012 25.00 13.11.2013 25.00 13.11.2014 25.00 13.11.2015 25.00 13.11.2016 25.00 13.11.2017 25.00

Page 188: Shelf Prospectus

8 Zero Coupon unsecured Taxable Bonds 2022-XIX Series of Rs. 300.56 crore (previous year Rs. 278.04 crore) are redeemable at face value of Rs.750.00 crore on 30.12.2022 [(net of Unamortised Interest of Rs. 449.44 crore ( previous year Rs.471.96 crore )].

9 6.80% Taxable non cummmulative unsecured redeemable Bonds 2011 - XXI - A Series of Rs.301.00 crore have been alloted on 02.11.2004. They are redeemable at par on expiry of 7 years from the date of allotment and / or are redeemable at par after the expiry of 5 years on exercising the ' put or call option ' by the bondholders or by the Company. Put option for Rs.215 crore has been exercised by the bondholders on 02.11.2009.

10 7.00% Taxable non cummmulative unsecured redeemable Bonds 2014 - XXI - B Series of Rs.168.80 crore have been alloted on 02.11.2004. They are redeemable at par on expiry of 10 years from the date of allotment and / or are redeemable at par after the expiry of 7 years on exercising the ' put or call option ' by the bondholders or by the Company.

11 7.00% Taxable non cummmulative unsecured redeemable Bonds 2011 - XXII Series of Rs.1040.70 crore have been alloted on 24.12.2004. They are redeemable at par on expiry of 7 years from the date of allotment and / or are redeemable at par after the expiry of 5 years on exercising the ' put or call option ' by the bondholders or by the Company. Put option for Rs.346.40 crore has been exercised by the bondholders on 24.12.2009.

12 7.00% Taxable non cummmulative unsecured redeemable Bonds 2012 - XXIII Series of Rs.349.90 crore have been alloted on 05.07.2005. They are redeemable at par on expiry of 7 years from the date of allotment and / or are redeemable at par after the expiry of 5 years on exercising the ' put or call option ' by the bondholders or by the Company. Put option for Rs.147.20 crore has been exercised by the bondholders on 05.07.2010.

13 The details of unsecured Taxable (Non cumulative) Bonds series XXIV to LXXI are as follows :

Bond Series Coupon Rate Date of Redemption Amount(Rs. in crore)

XXV Series 7.60% 30.12.2015 1734.70 XXVI Series 7.95% 24.02.2016 1261.80 XXVII - A Series 8.20% 17.03.2016 1000.00 XXVII - B Series 8.09% 17.03.2013 850.00 XXVIII Series 8.85% 31.05.2021 600.00 XXIX - A Series 8.80% 07.09.2016 250.00 XXIX - B Series 8.55% 07.09.2011 300.00 XXX Series 8.49% 09.10.2011 480.00 XXXI - A Series 8.78% 11.12.2016 1451.20 XXXII Series 9.25% 19.02.2012 578.50 XXXIII - A Series 9.80% 22.03.2012 122.00 XXXIII - B Series 9.90% 22.03.2017 561.50 XXXIV Series 9.90% 30.03.2017 500.50 XXXV Series 9.96% 18.05.2017 530.00 XXXVI - B Series 10.00% 15.06.2012 436.30 XXXVIII Series 9.80% 20.09.2012 1862.00 XL - B Series 9.22% 28.12.2012 510.00 XL - C Series 9.28% 28.12.2017 650.00 XLI - B Series 8.94% 15.01.2013 265.00 XLII - B Series 9.03% 15.02.2013 319.00 XLIII - B Series 9.30% 12.03.2013 271.60 XLIV Series 9.40% 25.03.2013 1260.30

XLVI Series MIBOR + 215 bps 29.05.2011 475.00

XLVII - A Series 9.55% 09.06.2011 450.60 XLVII - B Series 9.60% 09.06.2013 495.30 XLVII - C Series 9.68% 09.06.2018 780.70 XLVIII - A Series 10.75% 15.07.2011 571.50

Page 189: Shelf Prospectus

XLVIII - B Series 10.70% 15.07.2013 217.40 XLVIII - C Series 10.55% 15.07.2018 259.70 XLIX - A Series 10.90% 11.08.2013 313.60 XLIX - B Series 10.85% 11.08.2018 428.60 L - A Series 10.85% 25.08.2011 143.00 L - B Series 10.75% 25.08.2013 78.40 L - C Series 10.70% 25.08.2015 80.80 LI - A Series 11.15% 15.09.2011 495.20 LI - B Series 11.10% 15.09.2013 594.00 LI - C Series 11.00% 15.09.2018 3024.40 LII - A Series 11.40% 28.11.2013 662.70 LII - B Series 11.30% 28.11.2015 5.80 LII - C Series 11.25% 28.11.2018 1950.60 LIV - A Series 8.90% 16.02.2014 196.50 LV - A Series 6.90% 11.05.2012 877.00 LV - B Series 7.50% 11.05.2014 146.90 LVI Series 7.20% 09.07.2012 525.00 LVII - B Series 8.60% 07.08.2014 866.50 8.60% 07.08.2019 866.50 8.60% 07.08.2024 866.50 LVIII - A Series 7.75% 17.09.2012 100.00 LVIII - B Series 8.45% 17.09.2014 331.10 LIX - A Series 8.45% 15.10.2014 288.20 LIX - B Series 8.80% 15.10.2019 1216.60

LX - A Series 1 year

INCMTBMK + 135 bps

20.11.2012 175.00

LX - B Series 1 year

INCMTBMK + 179 bps

20.11.2019 925.00

LXI - Series 8.50% 15.12.2014 351.00 8.50% 15.12.2019 351.00 8.50% 15.12.2024 351.00 LXII - A Series 8.70% 15.01.2020 845.40 LXII - B Series 8.80% 15.01.2025 1172.60 LXIII - Series 8.90% 15.03.2015 184.00 8.90% 15.03.2020 184.00 8.90% 15.03.2025 184.00 LXIV - Series 8.95% 30.03.2015 492.00 8.95% 30.03.2020 492.00 8.95% 30.03.2025 492.00 LXV - Series 8.70% 14.05.2015 1337.50 8.70% 14.05.2020 162.50

1 year

INCMTBMK + 98 bps

14.05.2020 1175.00

1 year

INCMTBMK + 63.5 bps

14.05.2025 250.00

8.70% 14.05.2025 1087.50

Page 190: Shelf Prospectus

LXVI - A Series 3 year

INCMTBMK + 87.50 bps

15.06.2020 500.00

LXVI - B Series 3 year

INCMTBMK + 84.25 bps

15.06.2025 700.00

8.75% 15.06.2025 832.00 LXVI - C Series 8.85% 15.06.2030 633.00 LXVII Series 7.10% 15.07.2012 1100.00 LXVIII - A Series 8.25% 15.07.2015 147.00 LXVIII - B Series 8.70% 15.07.2020 1424.00 LXIX - Series 7.89% 15.09.2012 950.00 LXX Series 8.78% 15.11.2020 1549.00 LXXI - A Series 9.05% 15.12.2020 192.70 LXXI - B Series 9.05% 15.12.2025 192.70 LXXI - C Series 9.05% 15.12.2030 192.70 LXXII - A Series 8.97% 15.01.2018 144.00 LXXII - B Series 8.99% 15.01.2021 1219.00

14 As at 31.03.2011, Bonds of Rs.3.40 crore (previous year Rs.3.42 crore) are held by PFC Ltd. Employees Provident Fund Trust and Bonds of Rs.0.70 crore (previous year Rs.0.70 crore) are held by PFC Ltd. Gratuity Trust.

15 Foreign currency 6.61 % Senior Notes (USPP - I) of USD 180 million amounting to Rs.812.52 crore (previous year Rs.820.44 crore) are redeemable at par on 05.09.2017.

16 Long term loans due for repayment within one year are Rs. 3513.50 crore (previous year Rs.5256.62 crore).

Page 191: Shelf Prospectus

SCHEDULE - 4

FIXED ASSETS

(Rs. in crore)

Description

GROSS BLOCK ACCUMULATED DEPRECIATION NET BLOCK As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

I. TANGIBLE ASSETS :

Owned Assets

Land (Freehold) 2.59 2.59 2.59 2.59 2.59 0.00 0.00 0.00 0.00 0.00 2.59 2.59 2.59 2.59 2.59

Land (Leasehold) 37.87 38.33 38.33 38.33 38.33 0.00 0.00 0.00 0.00 0.00 37.87 38.33 38.33 38.33 38.33

Buildings 24.14 24.14 24.14 23.96 24.15 5.33 4.34 3.30 2.20 1.07 18.81 19.80 20.84 21.76 23.08

EDP Equipments 11.22 7.33 6.68 6.58 7.12 7.03 6.07 5.43 4.70 4.39 4.19 1.26 1.25 1.88 2.73

Office and other equipments 11.59 11.21 11.06 10.78 10.91 6.04 5.19 4.25 3.15 2.21 5.55 6.02 6.81 7.63 8.70

Furniture & Fixtures 7.19 7.02 6.88 6.82 6.87 4.44 3.87 3.20 2.39 1.52 2.75 3.15 3.68 4.43 5.35

Vehicles 0.13 0.18 0.18 0.18 0.29 0.11 0.15 0.14 0.12 0.16 0.02 0.03 0.04 0.06 0.13 Sub total 94.73 90.80 89.86 89.24 90.26 22.95 19.62 16.32 12.56 9.35 71.78 71.18 73.54 76.68 80.91

Leased Assets

Plant & Machinery 0.00 0.00 5.47 285.46 285.46 0.00 0.00 5.47 285.46 285.46 0.00 0.00 0.00 0.00 0.00

Lease Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.27 -0.51 0.00 0.00 0.00 0.27 0.51

Total 94.73 90.80 95.33 374.70 375.72 22.95 19.62 21.79 297.75 294.30 71.78 71.18 73.54 76.95 81.42

II. Intangible Assets :

Purchased Software (Useful Life - 5 years) 4.21 2.41 2.00 0.16 0.12 1.56 0.82 0.39 0.11 0.09 2.65 1.59 1.61 0.05 0.03

III. Capital Works in Progress - Intangible Assets ** 2.28 1.73 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.28 1.73 0.00 0.00 0.00

** Software Applications - Purchased and under implementation Note : The building has been capitalised on the basis of estimated value of work done as Final bills are not yet settled.

Page 192: Shelf Prospectus

SCHEDULE – 5

INVESTMENTS (Rs. in crore)

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

A. Long Term Investments (Trade - Unless otherwise specified)

- Valued at Cost

1,20,00,000 Equity Shares of Rs.10/- each fully paid up of PTC Ltd. (Quoted) 12.00 12.00 12.00 12.00 12.00

21,87,015 Equity Shares of Rs.10/- each fully paid up of National Power Exchange Ltd. (Unquoted - Non Trade) 2.19 0.83 0.83 0.00 0.00

17,50,000 Equity Shares (Face value of Rs.10/- each) of Power Exchange India Ltd. (Unquoted - Non Trade) 1.75 1.75 0.00 0.00 0.00

6,25,000 Equity Shares (Face value of Rs.10/- each) of Energy Efficiency Services (P) Ltd. (Unquoted - Non Trade) 0.63 0.63 0.00 0.00 0.00

4,65,000 Equity Shares of Rs.10/- each fully paid up of Subsidiaries / Associates (Unquoted - Non Trade) 0.47 0.47 0.47 0.40 0.50

3,089 14.50% Bonds of Rs.1,00,000/- each of ICICI Bank Ltd. (Unquoted - Non Trade) 0.00 0.00 0.00 30.89 30.89

8,330 4% Bonds of Rs.100/- each of IMP Power Ltd. (Unquoted - Non Trade) 0.08 0.08 0.08 0.08 0.00

- Valued at Cost (Less diminution, if any, other than temporary)

87,33,788 Units of " Small is Beautiful " Fund of KSK Investment Advisor Pvt. Ltd. (Face value per unit is Rs. 10) (Unquoted - Non Trade) 8.73 12.08 14.47 14.47 15.99

Less : Provision for diminution 0.18 0.24 1.32 0.26 0.50 8.55 11.84 13.15 14.21 15.49

- Valued at Cost (NPAs)

Page 193: Shelf Prospectus

50,000 Equity Shares of Rs.10/- each fully paid up of subsidiaries (Unquoted - Non Trade) 0.00 0.05 0.00 0.00 0.00

Less : Provision for contingencies 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

B. Current Investments - Valued scrip wise at lower of cost or market Price (Trade - Unless otherwise specified)

Equity Shares (Quoted) 3.83 3.83 8.01 8.01 0.00

Less : Provision for diminution 0.00 0.43 0.00 0.00 3.83 3.83 7.58 8.01 0.00

C. Application Money pending allotment of Shares

2,43,80,000 Equity shares (face value of Rs. 10 each) of energy Efficiency Services Pvt. Ltd. (Unquoted - Non trade) 24.38 0.00 1.75 0.00 0.00

TOTAL 53.88 31.43 35.86 65.59 58.88

Note : The number of units appearing in the description column pertains to the Investments as at 31.03.2011.

Page 194: Shelf Prospectus

SCHEDULE - 6

LOANS (Rs. in crore)

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

I. Secured Loans

a) Considered Good

Rupee Term Loans (RTLs) to State Electricity Boards, State Power Corporations,Central Public Sector Undertakings and State Governments

57995.39 45930.19 35309.17 22667.89 19169.31

RTLs to Independent Power Producers 3999.46 2699.27 3480.59 2537.55 2366.44

Foreign Currency Loans to Independent Power Producers / State Electricity Boards 324.30 406.11 587.85 520.85 616.29

Working Capital Loans to State Electricity Boards and State Power Corporations 500.00 0.00 0.00 0.00 0.00

Buyer's Line of Credit 11.41 19.94 47.97 76.01 104.04

Medium Term Loans 0.00 0.00 30.80 53.90 290.00

Lease Financing to Borrowers 131.37 300.52 191.60 211.67 232.96

RTLs to Equipment Manufacturers 2.50 3.76 5.01 6.26 0.00

Translation Loss on Foreign Currency Loans on back to back basis Recoverable from Sub-borrowers/ERMA 0.00 0.00 0.00 0.00 0.00

Incomes accrued & due on loans 8.54 1.93 14.70 4.62 25.00

62972.97 49361.72 39667.69 26078.75 22804.04 b) Others

RTL to Independent Power Producers - Projects under implementation 700.00 0.00 0.00 0.00 0.00 Less: Provision for contingencies 2.80 0.00 0.00 0.00 0.00

697.20 0.00 0.00 0.00 0.00

RTL to Independent Power Producers - NPA 8.92 8.92 8.92 8.92 8.92 Less: Provision for contingencies 8.92 2.68 2.68 1.78 0.89

0.00 6.24 6.24 7.14 8.03

Page 195: Shelf Prospectus

FCLs Independent Power Producers - NPA 0.00 0.00 0.00 0.00 0.00 Less: Provision for contingencies 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

Rupee Loans to Equipment Manufacturers - NPAs 0.00 0.00 0.00 0.00 7.51 Less: Provision for contingencies 0.00 0.00 0.00 0.00 0.75

0.00 0.00 0.00 0.00 6.76

Lease financing to Borrowers - NPA 217.49 0.00 0.00 0.00 0.00 Less: Provision for contingencies 22.89 0.00 0.00 0.00 0.00

194.60 0.00 0.00 0.00 0.00

II. Un Secured Loans

a) Considered Good

RTLs to State Electricity Boards, State Power Corporations,Central Public Sector Undertakings and State Governments 32572.26 26632.71 22784.66 23026.71 18487.46

RTLs to Independent Power Producers 628.63 808.25 118.30 666.23 464.73

Working Capital Loans to State Electricity Boards and State Power Corporations 1605.77 2948.99 1604.54 1486.46 1931.84

Foreign Currency Loans to State Electricity Boards and State Power Corporations 72.31 93.65 128.77 126.34 145.14

Buyer's Line of Credit 0.00 4.18 118.78 145.89 29.24

RTLs to Equipment Manufacturers 827.00 0.00 0.00 0.00 0.00

Bills Discounted 0.00 0.00 0.00 2.74 5.59

Translation Loss on Foreign Currency Loans on back to back basis Recoverable from Sub-borrowers

0.00 0.00 0.00 0.00 0.00

Incomes accrued & due on loans 0.00 0.02 0.01 28.05 8.88

35705.97 30487.80 24755.06 25482.42 21072.88

b) Others

RTLs to State Electricity Boards, State Power Corporations,Central Public Sector Undertakings and State Governments - NPAs

4.24 4.24 4.24 4.24 25.14

Page 196: Shelf Prospectus

Less : Provision for contingencies 4.24 4.24 4.24 4.24 14.69 0.00 0.00 0.00 0.00 10.45

Rupee Loans to Equipment Manufacturers - NPAs

0.00 0.00 0.00 0.00 0.00 Less : Provision for Contingencies 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

Working Capital Loans to State Electricity Boards, State Power Corporations - NPAs 0.00 0.00 0.00 0.00 0.74 Less : Provision for Contingencies 0.00 0.00 0.00 0.00 0.07

0.00 0.00 0.00 0.00 0.67

TOTAL 99570.74 79855.76 64428.99 51568.31 43902.83

Page 197: Shelf Prospectus

SCHEDULE - 7

CURRENT ASSETS, LOANS & ADVANCES (Rs.in crore)

Description

As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

I CURRENT ASSETS (A) CASH AND BANK BALANCES

a) (i) Cheques in hand 0.38 1.27 0.00 0.12 1.42 (ii) Imprest with postal authority 0.01 0.01 0.01 0.00 0.01

0.39 1.28 0.01 0.12 1.43

b) In Current Accounts with :- i) Reserve Bank of India 0.05 0.05 0.05 0.05 0.08 ii) Scheduled Banks 247.77 2.55 1.98 0.66 41.90

247.82 2.60 2.03 0.71 41.98

c) Fixed Deposits with Scheduled Banks 2102.05 1390.42 390.19 694.50 464.26

2350.26 1394.30 392.23 695.33 507.67

(B) OTHER CURRENT ASSETS

a) Interest accrued but not due on Loan Assets 1860.28 1543.23 1333.31 1048.60 1098.36

b) Other charges accrued but not due on Loan Assets 60.98 38.96 1.78 1.77 1.80

c) Interest accrued but not due on Employee advances 5.26 5.47 5.36 5.18 5.06

d) Interest Accrued but not due on Deposits and Investments 15.35 5.10 0.12 0.31 0.89

1941.87 1592.76 1340.57 1055.86 1106.11

II LOANS & ADVANCES Loans (considered good) *

a) to Employees (Secured) 11.76 8.98 9.08 7.93 11.42 b) to Employees (Unsecured) 15.97 8.64 5.37 5.15 1.06

27.73 17.62 14.45 13.08 12.48

Advances (Unsecured considered good)

Advances recoverable in cash or in kind or for value to be received

a) to Subsidiaries (including interest recoverable there on) 133.98 65.39 66.67 45.18 44.43

b) to Employees 0.59 0.40 0.25 0.15 0.37

Page 198: Shelf Prospectus

c) Prepaid Expenses 2.19 1.54 2.05 1.76 8.59

d) Unamortized financial charges on Commercial Paper 35.45 5.15 54.75 0.00 16.17

e) Others 329.35 240.49 149.58 97.21 181.95

f) Advance Income Tax and Tax Deducted at Source 106.52 157.81 152.88 48.08 12.41

g) Advance Fringe Benefit Tax 1.29 1.29 3.51 3.03 1.84

h) Security Deposits 3.48 1.43 1.51 1.29 4.43 612.85 473.50 431.20 196.70 270.19

Loans & Advances (Unsecured - Others) a) Others - NPAs 1.03 1.17 2.27 0.80 0.89

Less : Provision for contingencies 1.03 1.17 2.05 0.78 0.61 0.00 0.00 0.22 0.02 0.28

TOTAL 4932.71 3478.18 2178.67 1960.99 1896.73

* Note :-

1) Balance of Loans and Advances include :

Particulars As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

Loans given to Directors 0.16 0.22 0.22 0.04 0.01

Loans given to Officers 4.50 2.73 2.17 2.10 2.00

2) Maximum of balances of Loans and Advances during the year :

Particulars During

FY 2010-11

During FY 2009-

10

During FY 2008-

09

During FY 2007-

08

During FY 2006-

07

Loans given to Directors 0.22 0.29 0.31 0.07 0.03

Loans given to Officers 5.80 3.54 2.92 2.99 2.33

SCHEDULE - 8

CURRENT LIABILITIES & PROVISIONS (Rs. in crore)

Description As at 31.03.2011

As at 31.03.2010

As at 31.03.2009

As at 31.03.2008

As at 31.03.2007

Page 199: Shelf Prospectus

I. CURRENT LIABILITIES

Creditors for leased assets 0.00 0.00 0.45 0.45 0.45

Unclaimed / Unpaid Bonds * 6.52 22.83 0.96 0.87 0.88

Unclaimed / Unpaid Interest on Bonds ** 3.65 4.04 0.53 0.52 0.20

Unclaimed Dividend 0.60 0.55 0.23 0.32 0.00

Interest Accrued but not due : On Bonds 2305.69 1594.67 1288.03 608.75 359.18 On Loans 117.88 121.82 116.60 125.93 121.49

2423.57 1716.49 1404.63 734.68 480.67

Interest Differential Fund - KFW 49.01 47.60 34.19 36.85 38.61

Exchange Risk Management Account 0.00 0.00 0.00 0.00 0.00

Less : Exchange Risk Adjustment Account 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

Advance received from Subsidiaries (including interest payable thereon) 247.79 186.86 207.51 124.93 212.24

Amount payable to GoI under R-APDRP 6.88 0.11 0.00 0.00 0.00

Other liabilities *** 283.45 146.04 212.09 317.60 454.82

3021.47 2124.52 1860.59 1216.22 1187.87

II. PROVISIONS

Taxation - Income Tax 33.52 0.00 0.00 0.00 52.74

Taxation - Fringe Benefit Tax 0.80 0.80 2.90 2.91 1.84

Proposed Wage Revision 0.00 6.20 21.89 17.12 0.00

Leave Encashment 15.47 12.84 7.15 6.47 4.88

Economic Rehabilitation of Employees 1.26 1.31 1.29 3.17 3.04

Staff Welfare Expenses 9.93 8.59 8.16 6.97 3.67

Gratuity / Superannuation Fund 5.78 4.54 3.02 0.08 0.07

Proposed Final Dividend 197.99 172.17 154.95 114.78 114.78 Proposed Interim Dividend 0.00 0.00 0.00 0.00 0.00

Page 200: Shelf Prospectus

Proposed Corporate Dividend Tax 32.12 29.26 26.33 19.51 19.51 296.87 235.71 225.69 171.01 200.53

TOTAL 3318.34 2360.23 2086.28 1387.23 1388.40 * Inclueds an amount of Rs. 0.52 crore remaining unpaid pending completion of transfer formalities by the Claimnats. ** Includes and amount of Rs. 0.04 crore remaining unpaid pending completion of transfer formalities by the Clainats. *** Includes Book Overdraft of Rs. 167.36 crore from 1 bank.

SCHEDULE - 9

OPERATING INCOME

(Rs. in crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Interest on Loans 9760.51 7852.26 6338.76 4783.35 3737.98 Less : Penal interest waived to borrowers 0.00 0.00 0.00 2.55 0.01

9,760.51 7,852.26 6,338.76 4,780.80 3,737.97

Prepayment / Interest restructuring Premium on Loans 27.85 14.53 8.95 0.07 0.00 Upfront fees on Loans 41.72 22.06 12.48 13.21 1.22 Service charges on Loans 0.07 0.11 0.14 0.29 0.07 Management, Agency & Guarantee Fees 96.77 48.62 41.28 20.94 11.41 Commitment charges on Loans 3.04 4.54 3.01 3.93 1.22 Less : Commitment charges on Loans waived 0.08 0.00 0.00 0.25 0.30

2.96 4.54 3.01 3.68 0.92

Income from surplus funds 93.18 48.81 112.40 149.05 38.72 Interest received on Bank A/c Abroad 0.00 0.00 0.00 1.08 0.00 Lease income 15.81 14.90 23.29 23.99 34.67 Less : Lease Equilisation 0.00 0.00 0.27 0.24 14.21

15.81 14.90 23.02 23.75 20.46

Nodal Agency Fees under R-APDRP 89.62 -17.33 17.33 0.00 0.00

Advisory Fees - UMPPs 0.00 13.60 0.00 22.25 0.00

Income from Consultancy Assignments 0.00 0.00 0.00 14.16 5.90

TOTAL 10128.49 8002.10 6557.37 5029.28 3816.67

SCHEDULE - 10

OTHER INCOME

(Rs. in crore)

Page 201: Shelf Prospectus

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Interest on Income Tax Refund 24.49 54.43 17.97 0.71 0.00

Miscellaneous Income 2.75 6.93 2.79 1.14 7.12

Excess Liabilities written back 1.34 7.90 0.00 0.17 0.00

Dividend / Interest Income on Long term Investments 1.56 1.59 5.10 5.72 1.49

Dividend / Interest Income on Current Investments 0.15 0.12 0.31 0.03 0.00

Profit on sale of Long term Investments 1.78 0.53 0.00 0.28 0.80

Profit on sale of Current Investments 0.00 3.26 0.00 2.71 0.00

Profit on sale of Assets 0.00 0.00 0.00 0.00 0.01

TOTAL 32.07 74.76 26.17 10.76 9.42

Page 202: Shelf Prospectus

SCHEDULE - 11

INTEREST & OTHER CHARGES

(Rs. in crore)

Description

Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

I. Interest

On Bonds 4835.41 3700.99 2790.15 1651.18 1072.49

On Loans 1417.53 1051.21 1074.27 1210.82 1031.33

to GOI on Interest Subsidy Fund 56.22 80.70 98.19 113.05 107.52

Rebate for Timely Payment to Borrowers 157.05 127.36 112.78 85.75 73.16

Swap Premium ( Net ) -153.05 -42.31 13.89 18.73 21.57 6313.16 4917.95 4089.28 3079.53 2306.07

II. Other Charges

Commitment & Agency Fees 0.67 0.49 0.85 1.61 1.09

Financial Charges on Commercial Paper 15.45 64.49 81.55 32.53 27.63

Guarantee, Listing & Trusteeship fees 1.71 1.98 2.11 1.99 2.07

Management Fees on Foreign Currency Loans 61.04 27.71 0.00 0.66 0.00

Bank/Other charges 0.07 0.00 0.01 0.18 0.13

Net Translation / Actual Exchange Loss/gain (-) on Foreign Currency Loans 26.38 -103.84 252.53 20.14 -7.39

Interest paid on advances received from subsidiaries 6.85 4.28 7.19 7.76 5.43

Less : Interest received on advances given to subsidiaries 1.43 0.82 0.60 0.66 0.26

5.42 3.46 6.59 7.10 5.17

TOTAL 6423.90 4912.24 4432.92 3143.74 2334.77

Page 203: Shelf Prospectus

SCHEDULE - 12

BOND ISSUE EXPENSES

(Rs. in crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Interest on Application Money 37.42 27.06 38.18 7.63 9.34

Credit Rating Fees 1.57 2.24 1.81 1.82 1.55

Other Issue Expenses 20.83 10.68 7.39 2.41 2.43

Stamp Duty Fees 3.23 3.81 18.30 26.96 19.91

TOTAL 63.05 43.79 65.68 38.82 33.23

SCHEDULE - 13

PERSONNEL, ADMINISTRATION and OTHER EXPENSES

(Rs. in crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Salaries, Wages and Bonus 47.92 51.39 35.08 37.22 16.67

Contribution to Provident and other funds 4.87 3.69 1.54 1.24 1.19

Staff Welfare 7.41 12.56 5.73 11.33 7.05

Office Rent 0.40 0.35 0.33 0.28 3.52

Rent for Residential accomodation of employees 6.89 4.06 2.29 1.87 1.93

Electricity & Water charges 0.90 1.02 1.11 0.88 1.15

Insurance 0.03 0.12 0.11 0.06 0.01

Repairs & Maintenance 1.96 2.35 2.48 1.41 1.14

Stationery & Printing 0.46 0.34 0.89 0.77 0.68

Travelling & Conveyance 5.30 4.61 4.28 5.06 4.19

Postage, Telegraph & Telephone 0.70 1.11 0.56 0.86 0.90

Page 204: Shelf Prospectus

Professional & Consultancy charges 1.80 7.02 2.63 0.69 1.32

Miscellaneous 27.16 14.85 8.20 10.80 10.89

Loss on sale of assets 0.06 0.02 0.01 0.13 0.01

Auditors' remuneration 0.38 0.26 0.22 0.24 0.15

Expenditure relating to Consultancy Assignment 0.00 0.00 12.52 4.88 0.19

Donation 0.00 0.00 4.98 0.00 0.10

Service Tax 1.62 1.26 0.68 0.00 0.01

Rates & Taxes 0.65 1.02 3.06 2.26 2.73

Wealth Tax 0.00 0.01 0.01 0.01 0.01

Contribution to Project Monitoring Center 0.00 0.00 0.00 1.25 0.00

TOTAL 108.51 106.04 86.71 81.24 53.84

Less : Re-imbursement of expenditure incurred for operationalization of R-APDRP scheme **

15.89 0.00 0.00 0.00 0.00

TOTAL 92.62 106.04 86.71 81.24 53.84

** The amount pertains re-imbursements related to FYs 2008-09 and 2009-10. The expenses of Rs. 7.88 crore relating to the current financial year have been adjusted against the respective heads.

Note :-

(Rs. in Crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

1) Miscellaneous includes : Books & Periodicals 0.03 0.03 0.03 0.03 0.05 Advertisement 6.12 4.88 3.30 4.43 0.29 Membership & Subscription 0.82 1.01 0.39 0.43 0.38 Entertainment 0.42 0.36 0.29 0.29 0.27 Conference & Meeting Expenses 1.33 1.36 0.51 0.75 0.40 Security Expenses 0.74 0.67 0.52 0.42 0.43 Training 0.43 0.34 0.51 0.73 0.60 EDP Expenses 1.52 0.66 0.18 0.21 0.14 Business Promotion / Related Expenses 0.10 0.14 0.10 0.10 0.10 Equipment Hire Charges 0.00 0.34 0.14 0.12 0.21

Page 205: Shelf Prospectus

2) Auditors' Remuneration includes * : Audit fees 0.12 0.12 0.11 0.09 0.06 Tax Audit fees 0.04 0.04 0.03 0.03 0.02 Other certification services 0.23 0.10 0.07 0.11 0.07 Reimbursement of Expenses 0.01 0.00 0.01 0.01

3) Payments made in r/o CMD and Directors:

Salaries, Wages & Bonus 0.89 0.97 0.67 0.63 0.44 Contribution to Provident and other welfare funds 0.07 0.06 0.03 0.03 0.03 Other Perquisite payment 0.51 0.56 Inland travelling 0.41 0.27 0.29 0.26 0.22 Foreign travelling 0.49 0.35 0.03 0.08 0.32

* excludes Rs.0.10 crore. and Rs.0.09 crore paid / payable for certification works related to Infrastructure bonds issue and follow on public issue respectively.

SCHEDULE - 14

PRIOR PERIOD ADJUSTMENTS (Rs. in crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Prior Period Income :

Interest & Other charges 0.13 -0.20 0.51 2.75 -0.21 Miscellaneous Income

0.13 -0.20 0.51 2.75 -0.21 Prior Period Expenses :

Depreciation -0.03 -0.10 Interest & Other charges 0.19 -0.40 -0.26 -0.04 0.41 Personnel & Administration Expenses 0.04 0.07 0.75 -2.32 -0.60

0.20 -0.33 0.49 -2.46 -0.19

Prior Period Adjustments (Net) -0.07 0.13 0.02 5.21 -0.02

SCHEDULE - 15

APPROPRIATIONS (Rs. in crore)

Description Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

Page 206: Shelf Prospectus

Transfer towards Reserve for Bad & Doubtful Debts u/s 36 (1) (viia) (c) of Income Tax Act, 1961

142.47 123.92 76.46 90.97 78.52

Transfer to Special Reserve created and maintained u/s 36(1)(viii) of Income Tax Act, 1961

634.32 568.61 346.23 311.84 501.47

Debenture Redemption Reserve 0.06 0.00 0.00 0.00 0.00

Dividend & Corporate Dividend Tax : Interim Dividend Paid 401.72 344.33 304.16 286.94 145.00 Proposed Interim Dividend Proposed Final Dividend 197.99 172.17 154.95 114.78 114.78 Corporate Dividend Tax paid on Interim Dividend 66.72 58.52 51.69 48.77 20.34 Proposed Corporate Dividend Tax 32.12 29.26 26.33 19.51 19.51

General Reserve 262.00 236.00 197.00 121.00 99.00

Balance carried to Balance Sheet 882.18 824.44 813.14 212.95 7.52

TOTAL 2619.58 2357.25 1969.96 1206.76 986.14

Page 207: Shelf Prospectus

ANNEXURE - III

Statement of Cashflows

(Rs. in crore)

PARTICULARS

Year ended 31.03.2011

Year ended 31.03.2010

Year ended 31.03.2009

Year ended 31.03.2008

Year ended 31.03.2007

I. Cash Flow from Operating Activities :-

Net Profit before Tax and Extraordinary items 3544.14 3013.20 1990.47 1787.40 1506.86

ADD: Adjustments for Loss on Sale of Assets 0.06 0.02 0.01 0.13 0.01 Profit on Sale of Fixed Assets (0.01) Depreciation / Amortisation 5.05 3.81 4.12 4.50 3.79 Amortisation of Zero Coupon Bonds 22.52 20.83 19.27 17.83 16.49 Foreign Exchange Loss/Gain (2.47) (248.27) 235.66 23.00 (16.14) Dimunition in value of investments (0.06) (1.52) 1.49 (0.24) (0.01) Provision for Contingencies 31.79 (0.57) 2.17 (10.21) (4.85) Dividend / Interest and profit on sale of investment (3.49) (5.50) (5.41) (8.74) (2.29)

Provision for interest under IT Act 0.22 0.28 0.00 0.29 4.67 Provision for Retirement Benefits/Other Welfare Expenses/Wage revision 10.68 16.74 8.16 5.03 2.49

Operating profit before working Capital Changes: 3608.44 2799.02 2255.94 1818.99 1511.01

Increase/Decrease :

Loans Disbursed (Net) (19755.37)

(15496.04)

(12701.30) (7702.77) (8311.79)

Other Current Assets (349.11) (252.19) (284.71) 50.25 (411.85) Increase/Decrease in Miscellaneous Expenditure (28.78)

Loans & Advances (139.03) 100.14 (101.65) 109.73 (232.00) Current Liabilities and provisions 901.54 216.44 664.65 24.66 602.90

Cash flow before extraordinary items (15733.53)

(12632.63)

(10167.07) (5699.14) (6870.51)

Extraordinary items 0.00 0.00 0.00 0.00 0.00 Cash Inflow/Outflow from operations before Tax

(15733.53)

(12632.63)

(10167.07) (5699.14) (6870.51)

Income Tax paid (865.72) (811.34) (595.85) (570.65) (310.34) Income Tax Refund 13.51

Net Cash flow from Operating Activities (16599.25)

(13443.97)

(10762.92) (6269.79) (7167.34)

II. Cash Flow From Investing Activities :

Sale / decrease of Fixed Assets 0.64 0.05 0.05 0.08 0.06 Purchase of Fixed Assets (7.42) (1.51) (2.60) (1.58) (44.13) Increase/decrease in Capital Works in Progress (0.55) (1.73) 31.27

Plant & Machinery (Lease Equalisation) 0.00 0.27 0.24 14.21 Investments in Subsidiaries 0.00 (0.05) (0.07) 0.10 (0.50) Dividend / Interest and profit on sale of 3.49 5.50 5.41 8.74 2.29

Page 208: Shelf Prospectus

investment Other Investments (22.39) 5.95 28.31 (6.57) (41.86)

Net Cash Used in Investing Activities (26.23) 8.21 31.37 1.01 (38.66)

III. Cash Flow From Financial Activities :

Issue of Shares 997.19 Issue of Bonds 14023.96 12283.30 12808.90 7258.30 5299.70

Short Term Loans (Net) 3400.00 (750.00) (1080.00) 340.00 (31.10) Loan Against Fixed Deposits (Net) 565.92 1675.12 0.00 (171.00) 171.00 Raising of Long Term Loans 7855.00 8004.50 4750.00 4338.00 3483.00 Repayment of Long Term Loans (5870.00) (4473.00) (4449.00) (4885.71) (1563.00) Redemption of Bonds (3710.91) (1981.86) (892.30) (144.70) (272.14) Foreign Currency Loans (Net) 2214.60 486.88 (40.46) 335.61 (412.17) Interest Subsidy Fund (211.62) (245.45) (157.81) (164.88) 31.30 Unclaimed Bonds (Net) (16.31) 21.87 0.09 (0.01) 0.00

Payment of Final Dividend (including Corporate Dividend Tax) of Previous year (200.76) (181.28) (134.29) (134.29) (189.61)

Payment of Interim Dividend (including Corporate Dividend Tax) of Current year (468.44) (402.85) (355.85) (335.71) (165.34)

Net Cash in-flow from Financing Activities 17581.44 14437.23 10449.28 6435.61 7348.83

Net Increase/Decrease in Cash & Cash Equivalents 955.96 1001.47 (282.27) 166.83 142.83

Add : Cash & Cash Equivalents at beginning of the period

1394.30 392.83 674.50 507.67 364.84

Cash & Cash Equivalents at the end of the period 2350.26 1394.30 392.23 674.50 507.67

Details of Cash & Cash Equivalents at the end of the period:

Cheques in hand,Imprest with Postal authority & Balances with Banks

248.21 3.88 2.04 (20.00) 43.41

Fixed Deposits with Scheduled Banks 2102.05 1390.42 390.19 694.50 464.26 2350.26 1394.30 392.23 674.50 507.67

Page 209: Shelf Prospectus

ANNEXURE - IV FINANCIAL YEAR 2010-11

SIGNIFICANT ACCOUNTING POLICIES

1 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS

The Financial Statements have been prepared in accordance with historical cost convention on accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) and Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956. The preparation of Financial Statements requires the Management to make estimates and assumptions considered in the reported amounts of assets, liabilities (including contingent liabilities), revenues and expenses of the reporting period. The difference between the actual results and the estimates are recognized in the period in which the results are known and / or materialized.

2 RECOGNITION OF INCOME / EXPENDITURE 2.1 Income and expenses (except as stated below) are accounted for on accrual basis.

2.1.1 Income on non-performing assets and assets stated in the proviso to paragraph 6.2, infra is recognized in the year of its receipt. However, any unrealized income recognized before the asset in question became non-performing asset or the income recognized in respect of assets as stated in the proviso to paragraph 6.2, infra which remained due but unpaid for a period more than six months is reversed.

2.1.2 Fee for advisory and professional services for developing Ultra Mega Power Projectsis accounted for

on transfer of the project to the successful bidder. 2.1.3 Premium on interest restructuring is accounted for in the year in which the restructuring is approved. 2.1.4 Premium on premature repayment of loan is accounted for in the year in which it is received by the

Company. 2.1.5 Rebate on account of timely payment by borrowers is accounted for, on receipt of entire amount due

on time. 2.1.6 Income under the head carbon credit, upfront fees, lead manager fees, facility agent fees, security

agent fee and service charges etc. on loans is accounted for in the year in which it is received by the Company.

2.1.7 The discount / financial charges / interest on the commercial papers and zero coupon bonds (deep

discount bonds) are amortized proportionately over the period of its tenure. 2.1.8 Expenditure on issue of shares is charged off to the share premium received on the issue of shares.

2.2 Lease rental is accounted for on accrual basis. Income from Lease Rentals in respect of leases prior to

01.04.2001 is recognized on the basis of implicit interest rate, in the lease, in accordance with Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of India. Leases effected from 01.04.2001 are accounted for in accordance with Accounting Standard – 19 on Leases.

2.3 Income from dividend is accounted for in the year of declaration of dividend.

2.4 Recoveries in borrower accounts are appropriated as per the loan agreements.

2.5 The Company is raising demand of installments due as per loan agreements. The repayment is adjusted

against earliest disbursement irrespective of the rate of interest being charged on various disbursements.

2.6 Prior period expenses / income and prepaid expenses upto Rs.5,000/- are charged to natural heads of account.

2.7 (i) Nodal Agency Fees under Restructured Accelerated Power Development and Reforms Programme (R

– APDRP) is accounted for @1% of the sanctioned project cost in three steps- 0.40% on sanction of the project, 0.30% on disbursement of the funds and remaining 0.30% after completion of the sanctioned project (for Part – A) and verification of AT&C loss of the project areas (for Part – B).

Page 210: Shelf Prospectus

(ii) The actual expenditure incurred for operationalising the R– APDRP are reimbursable from Ministry of Power, Government of India and accounted for in the period so incurred.

3. FIXED ASSETS/DEPRECIATION

3.1 Fixed assets are shown at historical cost less accumulated depreciation, except the assets retired from

active use and held for disposal, which are stated at lower of the book value or net realizable value.

3.2 Additions to fixed assets are being capitalized on the basis of bills approved or estimated value of work done as per contracts in cases where final bills are yet to be received / approved.

3.3 Depreciation on assets other than leased assets is provided on written down value method, in accordance

with the rates prescribed in Schedule XIV of the Companies Act, 1956.

3.4 Depreciation on assets leased prior to 01.04.2001 is provided for on straight line method at the rates prescribed under the Schedule XIV to the Companies Act, 1956 or over the primary balance period of lease of assets, whichever is higher. The value of the net block so arrived at is further adjusted by balance in the lease equalization account. The assets leased after 01.04.2001 are not required to be depreciated as per Accounting Standard – 19.

3.5 Items of fixed assets acquired during the year costing up to Rs.5,000/- are fully depreciated.

4 INTANGIBLE ASSETS / AMORTIZATION

Intangible assets such as software are shown at cost of acquisition and amortization is done under straight-line method over life of the assets estimated by the Company.

5 INVESTMENTS

5.1 Quoted current investments are valued scrip wise at lower of cost or fair value.

5.2 Unquoted current investments are valued at lower of cost or fair value.

5.3 Long term investments are valued at cost. Provision is made for diminution, other than temporary in the value of such investments. However, diminution in value is reversed when there is rise in the value or if the reason for the reduction no longer exists.

5.4 Investments in mutual fund / venture capital fund are valued at cost, less diminution, if any, other than

temporary. However, diminution in value is reversed when there is rise in the value or if the reason for the reduction no longer exists.

6 PROVISIONS/WRITE OFF AGAINST LOANS AND ADVANCES

Prudential Norms 1.1 PFC being a Government owned Non Banking Financial Company (NBFC) is exempt from the RBI directions

relating to Prudential Norms. The Company, however, has formulated its own set of Prudential Norms with effect from 01.04.2003, which has been revised from time to time.

In respect of private sector utilities, the Company applies RBI exposure norms, as advised by RBI, vide letter of December, 2008. Further, RBI exempted PFC from its prudential exposure norms in respect of lending to State / Central entities in power sector till March’2012, vide its letter dated 18.03.2010.

RBI has accorded the status of Infrastructure Finance company (IFC) to PFC, vide its letter dated 28.07.2010. Accordingly, PFC maintains CRAR as applicable to IFC.

6.2 As per prudential norms approved by the Board of Directors and the Ministry of Power, an asset including a

lease asset, in respect of which installments of loan, interest and / or other charges remain due but unpaid for a period of six months or more, a term loan inclusive of unpaid interest and other dues if any , when the installment and /or interest remains unpaid for a period of six months or more, any amount which remains due but unpaid for a period of six months or more under bill discounting scheme and any amount due on account of sale of assets or services rendered or reimbursement of expenses incurred which remains unpaid for a period of six months or more are classified as Non-Performing Assets (NPA).

Page 211: Shelf Prospectus

However, the following assets would not be classified as non-performing assets and the income on these loans is recognized on receipt basis.

(i) Loans in respect of projects which are under implementation as per RBI Circular No. ref DBS.FID

No. C-11/01.02.00/2001-02 dated February 1, 2002 read with D.O. letter DBS FID No 1285/01.02.00/2001-02 dated May 14, 2002 and RBI letter No.DBOD.BP.No.7675/21.04.048/2008-09 dated. 11.11.2008 are classified in line with RBI guidelines for asset classification of Infrastructure projects, as applicable to banks from time to time.

(ii) A facility which is backed by the Central / State Government guarantee or by the State Government

undertaking for deduction from central plan allocation or a loan to State department , for a period not exceeding 12 months from the date from which Company’s dues have not been paid by the borrower.

(iii) A loan disbursed to an integrated power entity which is bifurcated on account of division of states,

the company shall follow the government order issued for division of assets and liabilities, unless the same is stayed by any court and the case is pending in the court.

(iv) Non servicing of part of dues disputed by the borrower for a period not exceeding 12 months from

the date from which the company’s dues have not been paid by the borrower. The disputed income shall be recognized only when it is actually realized. Any such disputed income already recognized in the books of accounts shall be reversed. Disputed dues means amount on account of financial charges like commitment charges , penal interest etc. and the disputed differential income on account of interest reset not serviced by the borrower due to certain issues remains unresolved. A dispute shall be acknowledged on case to case basis with the approval of the Board of Directors.

6.3 NPA classification and provisioning norms for loans, other credits and lease assets are given as under

(i) NPA for a period not exceeding 18 months : Sub-standard asset (ii) NPA exceeding 18 months : Doubtful asset (iii) When an asset is identified as loss asset or assets remain doubtful asset exceeding 36 months, which ever is earlier : Loss asset

6.4 Provision against NPAs is made at the rates indicated below: -

(i) Sub-standard assets : 10% (ii) Doubtful assets: (a) Secured portion / facility including that guaranteed by the state / central government or by the state government undertaking for deduction from plan allocation or loan to state department. Up to 1 year : 20% 1 – 3 years : 30% More than 3 years : 100% (b) Unsecured : 100% (iii) Loss assets : 100% The entire loss assets shall be written off. In case, a loss asset is permitted to remain in the books for any reason, 100% of outstanding shall be provided for.

6.5 For the purpose of assets classification and provisioning – (i) facilities granted to Government sector entities are considered loan-wise. (ii) facilities granted to Private sector entities are considered borrower -wise.

7 FOREIGN EXCHANGE TRANSACTIONS: 7.1 The following transactions are accounted for at the exchange rates prevailing on the date of the transaction as

per Accounting Standard – 11.

(i) Expenses and income in foreign currency; and (ii) Amounts borrowed and lent in foreign currency.

Page 212: Shelf Prospectus

7.2 The following balances are translated in Indian Currency at the exchange rates prevailing on the date of closing of accounts as per Accounting Standard – 11.

(i) Foreign currency loan liabilities. (ii) Funds kept in foreign currency account with banks abroad. (iii) Contingent liabilities in respect of guarantees given in foreign currency. (iv) Income earned abroad but not remitted / received in India. (v) Loans granted in foreign currency. (vi) Expenses and income accrued but not due on foreign currency loans / borrowing.

7.3 Where ever the Company has entered into a forward contract or an instrument that is, in substance a forward

exchange contract, the difference between the forward rate and exchange rate on the date of transaction is recognized as income or expenses over the life of the contract as per Accounting Standard – 11.

7.4 In case of loan from KFW, Germany, exchange loss, if any, at the year-end is debited to Interest Differential

Fund Account – KFW as per loan agreement. 8 GRANTS FROM GOVERNMENT OF INDIA: 8.1 Where grants are first disbursed to the grantee, the same are shown as amount recoverable from the Govt. of

India and are squared up on receipt of amount. 8.2 Where grants are received in advance from Govt. of India, the same are shown as current liabilities till the

payments are released to the grantee. 9 INTEREST SUBSIDY FUND 9.1 Interest subsidy for eligible borrowers received from the Ministry of Power, Govt. of India under Accelerated

Generation & Supply Programme (AG & SP) on net present value (NPV) basis is credited to Interest Subsidy Fund on receipt and is passed on to the borrowers over the eligible period of loan on respective dates of interest demands. Any excess / shortfall in the Interest Subsidy Fund is refunded or adjusted / charged off at the completion of respective scheme.

9.2 Interest Subsidy Fund is credited at the year-end with interest on the outstanding balance in the subsidy fund

by debiting Profit & Loss account, at rates specified in the Scheme. 10 R-APDRP FUND 10.1 Loans received from the Government of India under Re-structured Accelerated Power Development &

Reforms Programme (R – APDRP) as a Nodal agency for on lending to eligible borrowers are back to back arrangements with no profit or loss arising to the Company.

11 INCOME/RECEIPT/EXPENDITURE ON SUBSIDIARIES 11.1 Expenditure incurred on the subsidiaries is debited to the account “Amount recoverable from concerned subsidiary”. 11.2 Expenses in respect of man days (employees) are allocated to subsidiaries and administrative overheads are

apportioned to subsidiaries on estimated basis. Direct expenses are booked to respective subsidiaries. 11.3 Interest on amount recoverable from Subsidiaries is accounted for at the rate of interest applicable for project

loan / scheme (generation) to state sector borrower (category A) as per the policy of the Company. 11.4 Amounts received by subsidiaries as commitment advance from power procurers are parked with the Company

as inter-corporate loan and interest is provided on unused portion of these loans at the mutually agreed interest rates.

11.5 Request for Qualification (RFQ) document / Request for Proposal (RFP) document developed for subsidiaries

(incorporated for UMPP) are provided to subsidiary companies at a price equivalent to sale proceeds of RFQ / RFP document received by the subsidiary companies from the prospective bidders. The same is accounted for as income of the company on receipt from subsidiary company.

11.6 The company incurs expenditure for development work in the UMPPs. The expenditure incurred is shown as

amount recoverable from the respective subsidiaries set up for development of UMPPs. Provisioning / write off is considered to the extent not recoverable when an UMPP is abandoned by the Ministry of Power, Government of India.

Page 213: Shelf Prospectus

12 EMPLOYEE BENEFITS 12.1 Provident Fund, Gratuity and post retirement benefits

Company’s contribution paid / payable during the financial year towards Provident Fund is charged in the Profit and Loss Account. The Company’s obligation towards gratuity to employees and post retirement benefits such as medical benefits, economic rehabilitation benefit, and settlement allowance after retirement are actuarially determined and provided for as per Accounting Standard – 15 (Revised).

12.2 Other Employee Benefits

The Company’s obligation towards sick leave, earned leave, service award scheme are actuarially determined and provided for as per Accounting Standard – 15 (Revised)

13 INCOME TAX 1.1. Income Tax comprising of current tax is determined in accordance with the applicable tax laws and deferred

tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) in accordance with Accounting Standard – 22 on Accounting for Taxes on Income of the Institute of Chartered Accounts of India.

Deferred tax charge or credit and corresponding deferred tax liabilities or assets are recognized using tax rates that have been enacted or substantially established by the balance sheet date. Deferred Tax Assets are recognized and carried forward to the extent there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.

1.2. Since the Company has passed a Board resolution that it has no intention to make withdrawal from the Special

Reserve created and maintained under section 36(1)(viii) of the Income Tax Act, 1961, the special reserve created and maintained is not capable of being reversed and thus it becomes a permanent difference. The Company does not create any deferred tax liability on the said reserve in accordance with the clarification of the Accounting Standard Board of the Institute of Chartered Accountants of India.

14 Cash Flow Statement

Cash flow statement is prepared in accordance with the indirect method prescribed in Accounting Standard – 3 on Cash Flow Statement.

------

Page 214: Shelf Prospectus

FINANCIAL YEAR 2009-10

SIGNIFICANT ACCOUNTING POLICIES

1 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS

The Financial Statements have been prepared in accordance with historical cost convention on accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) and Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956. The preparation of Financial Statements requires the Management to make estimates and assumptions considered in the reported amounts of assets, liabilities (including contingent liabilities), revenues and expenses of the reporting period. The difference between the actual results and the estimates are recognized in the period in which the results are known and / or materialized.

2 RECOGNITION OF INCOME / EXPENDITURE

2.1 Income and Expenses (except as stated below) are accounted for on accrual basis.

2.1.1 Income on Non Performing Assets and Assets stated in the proviso to paragraph 6.2, infra is recognized in the year of its receipt. However, any unrealized income recognized before the asset in question became non-performing asset or the income recognized in respect of assets as stated in the proviso to paragraph 6.2, infra which remained due but unpaid for a period more than six months is reversed.

2.1.2 Fee for advisory and professional services for developing Ultra Mega Power Projectsis accounted for

on transfer of the project to the successful bidder. 2.1.3 Premium on interest restructuring is accounted for in the year in which the restructuring is approved. 2.1.4 Premium on premature repayment of loan is accounted for in the year in which it is received by the

Company. 2.1.5 Rebate on account of timely payment by borrowers is accounted for, on receipt of entire amount due

on time. 2.1.6 Income under the head carbon credit, upfront fees, lead manager fees, facility agent fees, security

agent fee and service charges etc. on loans is accounted for in the year in which it is received by the Company.

2.1.7 The discount/financial charges/interest on the Commercial Papers and Zero Coupon Bonds (Deep

Discount Bonds) are amortized proportionately over the period of its tenure.

2.1.8 Expenditure on issue of shares is charged off to the Share Premium received on the issue of shares.

2.2 Lease rental is accounted for on accrual basis. Income from Lease Rentals in respect of leases prior to 1.4.2001 is recognized on the basis of implicit interest rate, in the lease, in accordance with ‘Guidance Note on Accounting for Leases’ issued by the Institute of Chartered Accountants of India. Leases effected from 01.04.2001 are accounted for in accordance with Accounting Standard-19 on “Leases”.

2.3 Income from Dividend is accounted for in the year of declaration of dividend.

2.4 Recoveries in borrower accounts are appropriated as per the loan agreements.

2.5 The Company is raising demand of installments due as per loan agreements. The repayment is adjusted

against earliest disbursement irrespective of the rate of interest being charged on various disbursements.

2.6 Prior period expenses / income and prepaid expenses upto Rs.5000/- are charged to natural heads of account.

3 FIXED ASSETS/DEPRECIATION

3.1 Fixed assets are shown at historical cost less accumulated depreciation, except the assets retired from active use and held for disposal, which are stated at lower of the book value or net realizable value.

Page 215: Shelf Prospectus

3.2 The additions to Fixed Assets are being capitalized on the basis of bills approved or estimated value of work done as per contracts in cases where final bills are yet to be received / approved.

3.3 Depreciation on assets other than leased assets is provided on Written Down Value method, in

accordance with the rates prescribed in Schedule XIV of the Companies Act, 1956.

3.4 Depreciation on assets leased prior to 01.04.2001 is provided on Straight Line Method at the rates prescribed under Schedule XIV to the Companies Act, 1956 or over the primary balance period of lease of assets, whichever is higher. The value of the net block so arrived at is further adjusted by balance in the lease equalization account. The assets leased after 01.04.2001 are not required to be depreciated as per Accounting Standard-19.

3.5 Items of fixed assets acquired during the year costing up to Rs.5000/- are fully depreciated.

4 INTANGIBLE ASSETS / AMORTIZATION

Intangible assets such as software are shown at cost of acquisition and amortization is done under straight-line method over life of the assets estimated by the Company.

5 INVESTMENTS

5.1 Quoted current investments are valued scrip wise at lower of Cost or Fair value.

5.2 Unquoted current investments are valued at lower of cost or Fair value.

5.3 Long term investments are valued at cost. Provision is made for diminution, other than temporary in the value of such investments. However, diminution in value is reversed when there is rise in the value or if the reason for the reduction is no longer exists.

5.4 Investments in Mutual Fund / Venture Capital Fund are valued at cost, less diminution, if any, other than

temporary. However, diminution in value is reversed when there is rise in the value or if the reason for the reduction is no longer exists.

6 PROVISIONS/WRITE OFF AGAINST LOANS AND ADVANCES

Prudential Norms

1.1 In terms of Reserve Bank of India’s Notification No. DNBS.135/CGM (VSNM) – 2000 dated 13th January 2000, the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions are not applicable to the Company, being a Govt. Company registered with RBI as NBFC. The Company has however, formulated its own set of Prudential Norms with effect from 1.4.2003 which are revised from time to time.

1.2 As per Prudential Norms approved by the Board of Directors and Ministry of Power, an asset including a

lease asset, in respect of which installments of loan, interest and / or other charges remain due but unpaid for a period of six months or more, a term loan inclusive of unpaid interest and other dues if any , when the installment and /or interest remains unpaid for a period of six months or more, any amount which remains due but unpaid for a period of six months or more under bill discounting scheme and any amount due on account of sale of assets or services rendered or reimbursement of expenses incurred which remains unpaid for a period of six months or more are classified as Non-Performing Assets (NPA).

However, the following assets would not be classified as Non-Performing Assets and the income on

these loans is recognized on receipt basis.

(i) Loans in respect of projects which are under implementation as per RBI Circular No. ref DBS.FID No. C-11/01.02.00/2001-02 dated February 1, 2002 read with D.O. letter DBS FID No 1285/01.02.00/2001-02 dated May 14, 2002 and RBI letter No.DBOD.BP.No.7675/21.04.048/2008-09 dated. 11.11.2008 are classified in line with RBI guidelines for asset classification of Infrastructure projects, as applicable to banks from time to time.

(ii) A facility which is backed by Central / State Government guarantee or by State Government

undertaking for deduction from central plan allocation or a loan to State department , for a period not exceeding 12 months from the date from which Company’s dues have not been paid by the borrower.

Page 216: Shelf Prospectus

(iii) A loan disbursed to an integrated power entity which is bifurcated on account of division of states, the company shall follow the government order issued for division of assets and liabilities, unless the same is stayed by any court and the case is pending in the court.

(iv) Non servicing of part of dues disputed by the borrower for a period not exceeding 12 months from

the date from which the company’s dues have not been paid by the borrower. The disputed income shall be recognized only when it is actually realized. Any such disputed income already recognized in the books of accounts shall be reversed. Disputed dues means amount on account of financial charges like commitment charges , penal interest etc. and the disputed differential income on account of interest reset not serviced by the borrower due to certain issues remains unresolved. A dispute shall be acknowledged on case to case basis with the approval of Board of Directors.

6.3 NPA classification and provisioning norms for loans, other credits and lease assets are given as under

(i) NPA for a period not exceeding 18 months : Sub-standard asset (ii) NPA exceeding 18 months : Doubtful asset (iii) When an asset is identified as loss Asset or assets remain doubtful asset exceeding 36 months, which ever is earlier : Loss Asset

6.4 The provision against NPAs is made at the rates indicated below: -

(i) Sub-Standard Assets : 10%

(ii) Doubtful assets:

(a) Secured portion/facility including that guaranteed by state / central government or by state government undertaking for deduction from plan allocation or loan to state department.

Up to 1 year : 20% 1 – 3 years : 30% More than 3 years : 100%

(b) Unsecured : 100%

(iii) Loss assets : 100%

The entire loss assets shall be written off. In case, a loss asset is permitted to remain in the books for any reason, 100% of outstanding shall be provided for.

6.5 For the purpose of Assets Classification and Provisioning

(i) Facilities granted to Government Sector entities are considered loan-wise. (ii) Facilities granted to Private sector entities are considered borrower -wise.

7 FOREIGN EXCHANGE TRANSACTIONS: 7.1 The following transactions are accounted for at the exchange rates prevailing on the date of the transaction as

per Accounting Standard-11.

(i) Expenses and income in foreign currency; and (ii) The amounts borrowed and lent in foreign currency.

7.2 The following balances are translated in Indian Currency at the exchange rates prevailing on the date of

closing of accounts as per Accounting Standard-11.

(i) Foreign Currency Loan liabilities to the extent not hedged. (ii) Funds kept in foreign currency account with Banks abroad. (iii) Contingent liabilities in respect of guarantees given in foreign currency. (iv) Income earned abroad but not remitted / received in India. (v) Loans granted in foreign currency. (vi) Expenses and income accrued but not due on foreign currency loans/ borrowings.

7.3 Where ever the Company has entered into a forward contract or an instrument that is, in substance a forward

exchange contract, the difference between the forward rate and exchange rate on the date of transaction is recognized as income or expenses over the life of the contract as per Accounting Standard-11.

Page 217: Shelf Prospectus

7.4 In case of loan from KFW, Germany, exchange loss, if any, at the year-end is debited to Interest Differential Fund Account-KFW as per loan agreement.

8 GRANTS FROM GOVERNMENT OF INDIA: 8.1 Where grants are first disbursed to the grantee, the same are shown as amount recoverable from the Govt. of

India and are squared up on receipt of amount. 8.2 Where grants are received in advance from Govt. of India, the same are shown as Current liabilities till the

payments are released to the grantee. 9 INTEREST SUBSIDY FUNDS 9.1 Interest Subsidy for eligible borrowers received from Ministry of Power, Govt. of India under Accelerated

Generation & Supply Programme (AG&SP) on Net Present Value (NPV) basis is credited to Interest Subsidy Fund on receipt and is passed on to the borrowers over the eligible period of loan on respective dates of interest demands. Any excess / shortfall in the Interest Subsidy Fund is refunded or adjusted / charged off at the completion of respective scheme.

9.2 The Interest Subsidy Fund is credited at the year-end with interest on the outstanding balance in the subsidy

fund by debiting Profit & Loss account, at rates specified in the Scheme. 10 R-APDRP FUND 10.1 Loans received from Government of India under Re-structured Accelerated Power Development & Reforms

Programme (R-APDRP) as a Nodal agency for on lending to eligible borrowers are back to back arrangements with no profit or loss arising to the Company.

11 INCOME/RECEIPT/EXPENDITURE ON SUBSIDIARIES 11.1 Expenditure incurred on the subsidiaries is debited to the account “Amount recoverable from concerned Subsidiary”. 11.2 Expenses in respect of man days (employees) are allocated to Subsidiaries and administrative overheads are

apportioned to Subsidiaries on estimated basis. Direct expenses are booked to respective Subsidiaries. 11.3 Interest on amount recoverable from Subsidiaries is accounted for at the rate of interest applicable for term

loans to large generation projects, reforming states as per the policy of the Company. 11.4 The amounts received by Subsidiaries as Commitment Advance from Power Procurers are parked with the

Company as Inter Corporate Loan and Interest is provided on unused portion of these loans at the mutually agreed interest rates.

11.5 Request for Qualification (RFQ) document / Request for Proposal (RFP) document developed for subsidiaries

(incorporated for UMPP) are provided to subsidiary companies at a price equivalent to sale proceeds of RFQ / RFP document received by the subsidiary companies from the prospective bidders. The same is accounted for as income of the company on receipt from subsidiary company.

12 EMPLOYEE BENEFITS 12.1 Provident Fund, Gratuity and post retirement benefits

The Company’s Contribution paid / payable during the financial year towards Provident Fund is charged in the Profit and Loss Account. The Company’s obligation towards gratuity to employees and post retirement benefits such as medical benefits, economic rehabilitation benefit, and settlement allowance after retirement are actuarially determined and provided for as per Accounting Standard-15 (Revised).

12.2 Other Employee Benefits

The Company’s obligation towards sick leave, earned leave, service award scheme are actuarially determined and provided for as per Accounting Standrad-15 (Revised)

13 INCOME TAX 13.1. Income Tax comprising of Current Tax is determined in accordance with the applicable tax laws and Deferred

tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable

Page 218: Shelf Prospectus

income for the period) in accordance with Accounting Standard-22 on ‘Accounting for Taxes on Income’ of the Institute of Chartered Accountants of India.

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially established by the Balance Sheet date. Deferred Tax Assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.

13.2. Since the Company has passed a Board resolution that it has no intention to make withdrawal from the Special

Reserve created and maintained under section 36(1)(viii) of the Income Tax Act, 1961, the special reserve created and maintained is not capable of being reversed and thus it becomes a permanent difference. The Company does not create any deferred tax liability on the said reserve in accordance with the clarification of Accounting Standard Board of Institute of Chartered Accountants of India.

14 Cash Flow Statement

Cash flow statement is prepared in accordance with the indirect method prescribed in Accounting Standard 3 - ‘Cash Flow Statement’.

------

Page 219: Shelf Prospectus

FINANCIAL YEAR 2008-09

SIGNIFICANT ACCOUNTING POLICIES 1 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS

The Financial Statements have been prepared in accordance with historical cost convention on accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) and Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956. The preparation of Financial Statements requires the Management to make estimates and assumptions considered in the reported amounts of assets, liabilities (including contingent liabilities), revenues and expenses of the reporting period. The difference between the actual results and the estimates are recognized in the period in which the results are known and/or materialized.

2 RECOGNITION OF INCOME/EXPENDITURE

2.1 Incomes and Expenses (except as stated below) are accounted for on accrual basis.

2.1.1 Income on Non Performing Assets and Assets stated in proviso to paragraph 6.2 infra is recognized in the year of its receipt. However, any unrealized income recognized before the asset in question became non-performing asset or the income recognized in respect of assets as stated in proviso to paragraph 6.2 infra which remained due but unpaid for a period more than six months is reversed.

2.1.2 Fee for advisory and professional services for developing Ultra Mega Power Projectsis accounted for

on transfer of the project to the successful bidder. 2.1.3 Nodal Agency Fees under Restructured Accelerated Power Development and Reforms Programme is

accounted for on sanction of loans under the said scheme. 2.1.4 Lease rental is accounted for on accrual basis. Income from Lease Rentals in respect of leases prior to

1.4.2001 is recognized on the basis of implicit interest rate, in the lease, in accordance with ‘Guidance Note on Accounting for Leases’ issued by the Institute of Chartered Accountants of India. Leases effected from 01.04.2001 are accounted for in accordance with Accounting Standard-19 on “Accounting for leases”.

2.1.5 Premium on interest restructuring is accounted for in the year in which the restructuring is approved. 2.1.6 Premium on premature repayment of loan is accounted for in the year in which it is received by the

Company. 2.1.7 Rebate on account of timely payments by borrowers is accounted for, on receipt of entire amount due

in time. 2.1.8 Income under the head carbon credit, upfront fees, lead manager fees, facility agent fees, security

agent fee and service charges on loans is accounted for in the year in which it is received by the Company.

2.1.9 Expenditure incurred on raising of funds is charged to the Profit and Loss Account in the year in which it is incurred.

2.1.10 The discount/financial charges/interest on the Commercial Papers and Zero Coupon Bonds (Deep

Discount Bonds) are amortized proportionately over the period of its tenure. 2.1.11 Inco