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NOTES TO ACCOUNTS

Suzlon Energy Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 2633.29 Cr. P/BV -0.31 Book Value (₹) -15.97
52 Week High/Low (₹) 9/3 FV/ML 2/1 P/E(X) 0.00
Bookclosure 27/07/2018 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2018-03 

1. Company information

Suzlon Energy Limited (‘SEL’ or ‘the Company’) having CIN: L40100GJ1995PLC025447 is a public company domiciled in India and is incorporated under the provisions ofthe CompaniesAct applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office ofthe Company is located at “Suzlon”, 5 Shrimali Society, Near Shree Krishna Complex, Navrangpura, Ahmedabad - 380 009, India. The principal place of business is its headquarters located at One Earth, Hadapsar, Pune-411 028, India.

The Company is primarily engaged in the business of manufacturing of wind turbine generators (‘WTGs’) and related components of various capacities.

The financial statement were authorised for issue in accordance with a resolution ofthe directors on May 30, 2018.

2. Basis of preparation and significant accounting policies

2.1 Basis of preparation

The financial statements ofthe Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read together with the Companies (Indian Accounting Standards) Rules, 2015, as amended (“the Rules”).

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured atfairvalue:

- Derivative financial instruments and

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

The financial statements are presented in Indian Rupees and all values are rounded to the nearest Crore (INR 0,000,000) up to two decimals, except when otherwise indicated.

Financial statements for the year ended March 31, 2017 were audited by-S. R. Batliboi &Co. LLP, Pune and SNK &Co. Pune.

2.2 Recent accounting developments Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance ofthe Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2018 and has amended the following standards:

Appendix B to Ind AS 21 Foreign currency transactions and advance considerations:

On March 28, 2018, the Ministry of Corporate Affairs (‘the MCA’) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21 Foreign currency transactions and advance consideration which clarifies the date ofthe transaction for the purpose of determining the exchange rate to use on initial recognition ofthe related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The amendment will come into force from April 1, 2018. The Company has evaluated the effect ofthis on the financial statements and the impact is not material.

Ind AS 115 Revenue from contracts with customers:

On March 28, 2018, the MCA notified Ind AS 115. The cores principle of new standard is that an entity should recognise revenue to depict the transfer of promised good or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cashflows arising from the entity’s contracts with customers.

The standard permits two possible methods oftransition:

- Retrospective approach-Under this approach the standard will be applied retrospectively to each reporting period presented in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

- Retrospectively with cumulative effect of initially applying the standard recognised at the date of initial application (Cumulative catch-up approach).

The effective date for adoption of Ind AS 115 is financial period beginning from April 1, 2018. The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly, comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The Company is evaluating the impact of adoption of Ind AS 115 and based on the preliminary assessment there shall be no material impact.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

a. Significant judgements in applying the Company’s accounting policy

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Guarantee classified as an insurance contract

The Company, together with its three Indian subsidiaries and a joint venture are obligors to the State Bank of India and other Indian lenders and have given security in connection with loan availed by AE Rotor Holding B.V. (‘AERH’), The Netherlands, a step down wholly owned subsidiary ofthe Company. The Company has treated the said guarantee as an insurance contract under Ind AS 104. Please refer to Note 4 for further details.

Operating lease commitments-Company as a lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions ofthe arrangements, such asthe lease term not constituting a major part ofthe economic life ofthe commercial property and the fair value of the asset, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

Revenue recognition and presentation

The Company assesses its revenue arrangements against specific criteria, i.e. whether it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services, in order to determine if it is acting as principal or as an agent. When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance ofthe agreement between the Company and its business partners are reviewed to determine each party’s respective role in the transaction.

b. Significant accounting estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Uncertainty about these assumption and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Allowance for trade receivables

Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate allowances for expected credit loss. The Company recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. The carrying value of allowance for doubtful debts is Rs 73.49 Crore, Rs 89.91 Crore as of March 31, 2018 and March 31, 2017 respectively. Refer Note 12

Share-based payments

Estimating fair value for share-based payment transactions requires determination ofthe most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 38.

Taxes

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, future tax planning strategies. The company has unabsorbed depreciation, unabsorbed business loss, unutilised MAT credit and capital loss details which are given in Note 34. The unabsorbed depreciation can be carried forward indefinitely. The business loss can be carried forward for 8 years, MAT credit for 15 years and capital loss for 8 years. Majority of business losses will expire in between March 2020 to March 2022, MAT credit in between March 2022 to March 2023 and capital loss in between March 2024 to March 2025. As there are not certain taxable temporary differences or tax planning operations, the Company has not recognised deferred tax assets on conservative basis. Refer Note 34

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination ofthe discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated, the management considers the interest rates of government bonds in currencies consistent with the currencies ofthe post-employment benefit obligation.

The estimates of future salary increases take into account the inflation, seniority, promotion and other relevant factors.

Further details about gratuity obligations are given in Note 37.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded inthe balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer Note 45 for further disclosures.

Intangible asset under development

The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation ofthe project, discount rates to be applied and the expected period of benefits. Refer Note 10. Refer Note 2.3 (i) for the estimated useful life of intangible assets.

Property, plant and equipment

Refer Note 2.3 (g) for the estimated useful life of property, plant and equipment. The carrying value of property, plant and equipment has been disclosed in Note 6.

Recompense liability

The Company is in negotiation with CDR lenders for a voluntary exit from CDR scheme. The Company has recognised recompense liability payable to CDR lenders based on management estimate which is derived considering certain scenarios and assumptions in relation to interest rate, waiver in recompense, timing of loan repayment and CDR Exit etc. The amount payable by the Company as recompense is dependent on various factors and also on discussions and negotiations with the CDR lenders. Refer Note 22.

4. SBLC facility and security given to AE Rotor Holding B.V. (‘AERH’)

Suzlon Energy Limited (‘the Company’), together with its three Indian subsidiaries and a joint venture are obligors to the State Bank of India and other Indian lenders under an Onshore SBLC Facility Agreement and have given security on behalf of AE Rotor Holding B.V. (‘AERH’) a step down wholly owned subsidiary of the Company under the Offshore SBLC Facility Agreement for the issuance ofthe stand-by letter of credit by State Bank of India in favour ofthe Security Agent acting on behalf ofthe lenders of AERH. The outstanding amount of loan as at March 31, 2018 is USD 569.40 Million. In accordance with the loan agreement the said loan is repayable in February 2023. The Company has treated the said guarantee as an insurance contract under Ind AS 104 and has assessed that no provision is required thereon as on March 31, 2018.

5. Composite scheme of amalgamation and arrangement

On April 27, 2016, the board of directors ofthe Company had approved a composite scheme which comprised of merger of its three wholly owned subsidiaries, namely, SE Blades Limited (‘SEBL’), SE Electricals Limited (‘SEEL’) and Suzlon Wind International Limited (‘SWIL’) inthe Company, with effect from January 1, 2016 (being the appointed date for merger) and demerger of tower business from wholly owned subsidiary, Suzlon Structures Limited (‘SSL’) (now known as Suzlon Global Services Limited) (‘Scheme’) with the Company, with effect from April 1, 2016 (being the appointed date for demerger).

This Scheme has been approved by the Honourable National Company Law Tribunal, Ahmedabad Bench on May 31, 2017 and the Company had incorporated the “accounting effects” in the financial statement of FY 2016-17, as per the accounting treatment prescribed in the Scheme which is in compliance and accordance with the accounting standards applicable to the Company as ofthe appointed date ofthe Scheme. As per the Scheme, the Company has recognised Goodwill of Rs 1,059.80 Crore which shall be be amortised over five years in accordance with the Scheme. Had the Company applied the accounting treatment in accordance with Ind-AS 103, this accounting treatment would have been different.

Goodwill acquired pursuant through the Scheme has been allocated to the cash generating units based in special economic zone. These CGUs form part ofthe WTG operating segment, for impairment testing. The carrying amount of goodwill of Rs 471.80 Crore as at March 31, 2018 and Rs 643.36 Crore as at March 31, 2017, has been allocated to single CGU.

The Company performed its annual impairment test for years ended March 31, 2018 and March 31, 2017, respectively. The Company considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment.

The recoverable amount of the CGU has been determined based on a value in use calculation using cash flow projections from financial projections approved by senior management covering a five-year period. The pre-tax discount rate applied to cash flow projections for impairment testing during the current year is 26.2% (26.2%) and cash flows beyond the five-year period are extrapolated using a 5% growth rate (5%). The Company is also amortising the goodwill over a period of five full year’s period.

Key assumptions used for value in use calculations

The calculation of value in use for the CGU is most sensitive to the following assumptions:

Discount rates - Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks ofthe underlying assets that have not been incorporated inthe cash flow estimates. The discount rate calculation is based on the specific circumstances ofthe Company and is derived from its weighted average cost of capital (‘WACC’). The WACC takes into account both debt and equity. The cost of equity is derived by applying capital asset pricing model and considering equity premium of 7% for Indian market and 5.5% for overseas market. The cost of debt is based on current average borrowing cost that a market participant would expect to pay to obtain its debt financing assuming the target capital structure. Weightage of equity and debt are considered based on the average capital structure of public companies in the wind industry. The beta factors are evaluated annually based on publicly available market data of companies in wind industry. Adjustments to the discount rate are made to factor in the specific amount and timing ofthe future tax flows in order to reflect a pre-tax discount rate.

Gross margins - The management expects to earn a stable margin over the five year period. The rate used by management is comparable to other comparable CGUs owned bythe Company.

Sensitivity to changes in assumptions

The implications of the key assumptions for the recoverable amount are discussed below:

- Gross margins - A decreased demand can lead to a decline in gross margin. A decrease in gross margin to 3% would result in impairment.

- Discount rates - A rise in pre-tax discount rate to 8% would result in impairment.

During the financial year 2016-17, in accordance with a Scheme for Arrangement, the Company has recognised goodwill on amalgamation aggregating to Rs 1,059.80 Crore and amortised Rs 171.56 Crore for the year ended March 31, 2018 in the standalone financial statements. This accounting treatment is different from the accounting treatment prescribed under Indian Accounting Standards.

6. Capital work-in-progress

Capital work in progress as at March 31, 2018, Rs 112.06 Crore (previous year: Rs 72.73 Crore), primarily includes building and plant and machineries under construction.

The company’s investment property consist of three commercial properties.

As at March 31, 2018 and March 31, 2017 the fair value of the properties are Rs 183.84 Crore and Rs 81.16 Crore respectively. The fair valuation is derived by management internally.

Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value ofthe income stream associated with the asset.

7. Intangible assets under development

Intangible assets under development as at March 31,2018, Rs 179.82 Crore (previous year: Rs 55.53 Crore), primarily includes design and drawings under development.

Other financial assets include deposits of Rs 3.53 Crore (previousyear: Rs3.53 Crore) from private companies in which director is a director or member.

a) The Company incurs expenditure on development of infrastructure facilities for power evacuation arrangements as per authorisation ofthe State Electricity Boards (‘SEB’) / Nodal agencies in Maharashtra and Tamil Nadu. The expenditure is reimbursed, on agreed terms, by the SEB/ Nodal agencies. In certain cases, the Company recovers the cost from customers in the ordinary course of business. The cost incurred towards development of infrastructure facility inventory is reduced by the reimbursements received from SEB/Nodal agencies and the net amount is shown as ‘Infrastructure Development Asset’ under other financial assets. The excess of cost incurred towards the infrastructure facilities net of reimbursement received from SEB/Nodal agencies/customers is charged to statement of profit and loss as infrastructure development expenses. Other asset include Rs 250.06 Crore (previousyear: Rs 278.53 Crore)

For details of financial assets given as security to lenders refer Note 21(b).

a. The Company intends to dispose one of its commercial property given on lease within next 12 months. The property was previously used as its corporate office for carrying out the business. No impairment loss was recognised on reclassification of the property as held for sale as the Company expects that the fair value (estimated based on the recent market prices of similar properties in similar locations) less costs to sell is higher than the carrying amount.

b. The Company has reclassified its investments in two subsidiaries and ten joint ventures, who are in the business of generation of electricity through solar energy, as “held for sale”. These investments has been measured at the lower of carrying amount and fair value less cost to sell. The disposal group does not constitute a separate major component of the Company and therefore has not been classified as discontinued operations. As per CompaniesAct 2013, these entities are still subsidiaries ofthe companyas at March 31, 2018.

b. Terms/rights attached to equity shares

The Company has only one class of equityshares having a par value of Rs 2 each. Each holder of equityshares is entitled to one vote per share except for the underlying depository shares held against the Global Depository Receipts (‘GDRs’).

Holders ofthe GDR have no voting rights with respect to the equityshares represented bythe GDRs Deutsche Bank Trust Company Americas (the ‘Depository’), which is the shareholder on record in respect of the equity shares represented bythe GDRs, will not exercise any voting rights in respect ofthe equityshares against which GDRs are issued, unless it is required to do so by law. Equity shares which have been withdrawn from the Depository facility and transferred on the Company’s register of members to a person other than the Depository, ICICI Bank Limited (the ‘Custodian’) or a nominee of either the Depository or the Custodian may be voted bythe holders thereof.

As regard the shares which did not have voting rights as on March 31, 2018 are GDRs - 22,61,816 / (equivalent shares-90,47,264) and as on March 31, 2017 are GDRs-2,749,000/(equivalent shares-10,996,000).

The Company declares and pays dividends in Indian rupees. The dividend proposed bythe Board of Directors is subject to approval ofthe shareholders inthe ensuing Annual General Meeting.

In the event of liquidation ofthe Company, the holder of equity shares will be entitled to receive remaining assets ofthe Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equityshares held bythe shareholders.

The Company on February 13, 2015 signed a Shareholder Agreement as amended by an Amendment Agreement dated December 11, 2015 (collectively the “Agreement”) with the Investor Group in terms of which the Investor Group agreed to subscribe to 100 Crore equityshares at the rate of Rs 18 per shares aggregating to Rs 1,800.00 Crore, which were allotted on May 15, 2015. This is in addition to shares acquired under an Open Offer under SEBI Takeover Regulations. The key terms of the Agreement with the Investor Group are as follows;

- Appointment of one nominee director.

- Certain decisions by virtue ofthe agreement need shareholder approval.

- Investor group and Promoters ofthe Company shall be considered as Persons Acting in Concert under Regulation 2(1) (q) ofthe SEBI Takeover Regulations.

- If the Promoters decide to transfer any of their shareholding in the Company, they shall first offer these to the Investor Group. Also, if the Investor Group decide to transfer any of their shareholding in the Company, they shall first offer these to the Promoter Group.

- The Investor Group shares shall be subject to a lock-in period applicable under applicable regulations or one-year whichever is later.

- The Investor Group shall be consulted in accordance with the provisions of the Agreement.

c. Aggregate number of bonus shares issued, share issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:

The Company issued 10,095,000 (previous year: 10,095,000) shares to employees under Employee stock purchase scheme, wherein part consideration was received in the form of employee services.

d. Shares reserved for issue under options

For details of shares reserved for issue underthe employee stock option (ESOP) plan ofthe Company, refer Note 38(b), under heading of “Closing balance”.

For details of shares reserved for issue on conversion of FCCBs, refer Note 21(c) (i) for terms of conversion / redemption.

For details of shares reserved for issue on conversion of Funded Interest Term Loan into equity shares or compulsory convertible debentures and issue of equity shares in lieu of sacrifice ofthe CDR Lenders, refer Note 21(a) (iv) for terms of conversion. There are no shares reserved for issue under options as at the balance sheet date.

Note: As per records ofthe Company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

Nature and purposes of various items in other equity:

(a) Securities premium

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions ofthe Companies Act, 2013.

(b) Share option outstanding account

The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration.

(c) Capital reserve

The Company recognises profit or loss on purchase / sale ofthe equity instruments in case of merger to capital reserve.

(d) Capital redemption reserve

The Company has transferred amount from statement of profit or loss to capital redemption reserve on redemption of preference shares issued by the company.

(e) Foreign currency monetary item translation difference account (FCMITDA)

The Company recognises FCMITDA for unamortised exchange difference pertains to long term foreign currency monetary items. (refer Note 2.3(b))

(f) General reserve

The Company has transferred a portion ofthe net profit ofthe company before declaring dividend or a portion of net profit kept separately for future purpose is disclosed as general reserve.

(g) Equity component of compound financial instruments

The FCCB has been classified as compound financial instrument. This instrument has been split between equity and liability by primarily valuing the liability portion without equity conversion options. The balance between instrument value and liability component has been treated as the value of equity conversion options. On the date oftransition the amount of FCMITDA has been recomputed under Ind AS. The difference in the value as a result has been transferred to retained earnings.

a) Corporate debt restructuring (CDR)

During the financial year ended March 31, 2013, Suzlon Energy Limited (‘SEL’) along with its identified domestic subsidiaries and a joint venture collectively referred to asthe ‘Borrowers’ and individually as the ‘Borrower’, had restructured various financial facilities (restructured facilities) from the secured CDR lenders under the Corporate Debt Restructuring Proposal. Pursuant to approval of CDR Package bythe CDR Empowered Group (‘CDR EG’), the implementation of the CDR package was formalised upon execution of Master Restructuring Agreement (MRA) between the CDR Lenders and Borrowers during the financial year ending March 31, 2013. The MRAinter-alia covers the provisions to govern the terms and conditions of restructured facilities.

The key features ofthe CDR package are as follows:

i. Repayment of Restructured Term Loans (‘RTL’) after moratorium of 2 years from cut-off date in 32 structured quarterly instalments commencing from December 2014 to September 2022. The moratorium period of 2 years has expired on September 30, 2014.

ii. Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan (‘WCTL’) and the repayment terms of which are in similar to that of RTL with enabling mandatory prepayment obligations on realisation of proceeds from certain asset sale and capital infusion.

iii. Restructuring of existing fund based and non-fund based working capital facilities, subject to renewal and reassessment every year.

iv. Unpaid Interest due on certain existing facilities on cut-off date, interest accrued during the moratorium period on RTL and WCTL and interest on fund based working capital facilities for certain period were to be converted into Funded Interest Term Loans (‘FITLs’) and which were to be converted into equity shares ofthe Company.

v. The rate of interest on RTL, WCTL, FITL and fund based working capital facilities were reduced to 11.00% per annum with reset option in accordance with MRA.

vi. Waiver of existing events of defaults, penal interest and charges etc. in accordance with MRA.

vii. Contribution of Rs 250.00 Crore in SEL by promoters, their friends, relatives and business associates as stipulated, conversion of existing promoter’s loan of Rs 145.00 Crore into equity shares / CCDs at the price determined in compliance with Securities and Exchange Board of India.

Other key features ofthe CDR Package are:

i. Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA and;

ii. SEL to issue equity shares in lieu of sacrifice ofthe CDR Lenders for the first three years from cut-off date at the price determined in compliance with Securities and Exchange Board of India, if exercised by CDR lenders.

In case of financial facilities availed from the non-CDR Lenders, the terms and conditions shall continue to be governed bythe provisions ofthe existing financing documents.

During the financial year ended March 31, 2015, the restructuring proposal with Power Finance Corporation (‘PFC’) which is a non-CDR lender was approved by CDR EG. As per the terms of restructuring, the PFC has converted certain portion of interest accrued into FITL I and FITL II. Repayment of outstanding term loan would be in accordance with terms and conditions similar to those of RTL, whereas repayment of FITL I would be made in 32 equal quarterly instalments and should be co-terminus with RTL. Repayment of FITL II would be made in 12 quarterly instalments from December 2022 to September 2025. To give effect to the restructuring a bilateral agreement between the Borrower and PFC was entered into on August 12, 2015.

b) The details of security for the current and non-current secured loans are as follows:

i) In case of financial facilities from CDR lenders in accordance with MRA and non-CDR lenders, RTL, WCTL, FITL aggregating Rs 2,392.86 Crore (previous year: Rs 2,396.91 Crore) of which Rs 2,175.50 Crore (previousyear: Rs 2,336.41 Crore) classified as long-term borrowings and Rs 217.36 Crore (previousyear: Rs 60.50 Crore) classified as current maturities of long-term borrowings, fund based working capital facilities of Rs 2,276.08 Crore (previous year: Rs 1,512.03 Crore), and non-fund based working capital facilities are secured by first pari passu charge on all chargeable present and future tangible / intangible movable assets of each of the Borrowers, first charge on all chargeable present and future immovable assets (excluding the identified properties) of each ofthe Borrowers, first charge on all present and future chargeable current assets of each ofthe Borrowers, first charge over Trust and Retention Account (‘TRA’) and other bank accounts ofthe Borrowers, pledge of equity shares held by SEL in its identified domestic subsidiaries and a joint venture which are forming part ofthe Borrowers, negative lien over the equity shares held by SEL in SE Forge Limited, pledge on shares of Suzlon Energy Limited, Mauritius (‘SELM’) held by SEL, negative lien over the equity shares of certain overseas subsidiaries of SEL held by its step down overseas subsidiaries, pledge of certain equity shares of SEL held by its promoters, personal guarantee ofthe chairman and managing director of SEL and limited personal guarantee of an erstwhile director of a subsidiary.

ii) Rs 49.71 Crore (previous year: Rs 50.00 Crore) of which Rs 42.25 Crore (previous year: Rs 50.00 Crore) classified as long-term borrowings and Rs 7.46 Crore (previousyear: Rs Nil) classified as current maturities of long-term borrowings is secured by first pari passu charge on all the assets ofthe borrowers provided to the CDR lenders shown in long-term borrowings. This loan is repayable in 24 quarterly structured instalments starting from March 18 quarter.

iii) Rs 6.13 Crore (previousyear: Rs6.13 Crore) of which Rs4.98 Crore (previousyear: Rs 6.13 Crore) classified as long-term borrowings and Rs 1.15 (previous year: Rs Nil) classified as current maturities of long-term borrowings is secured by first pari passu charge on all the assets ofthe borrowers provided to the CDR lenders shown in long-term borrowing. This loan is repayable in 15 quarterly structured instalments starting from September 18 quarter.

iv) Rs 403.82 Crore (previous year: Rs 413.32 Crore) secured by way of exclusive charge on the stock, receivables and escrow bank account maintained for the identified projects with the lender, pledge of shares and corporate guarantee of third parties.

v) Rs Nil (previous year: Rs 50.35 Crore) secured by first pari passu charge on all current assets (except for land considered as stock in trade) and first pari passu charge on all property, plant and equipment and this is shown in short-term borrowings.

vi) Vehicle loan of Rs 2.37 Crore (previousyear: Rs 1.10 Crore) of which Rs 0.92 Crore (previousyear: Rs 1.10 Crore) classified as long-term borrowings and Rs 1.45 Crore (previous year: Rs 0.66 Crore) classified as current maturities of long-term borrowings is secured against vehicle under hire purchase contract.

vii) Rs 472.74 Crore (previous year: Rs Nil) secured by first pari-passu charge on all the existing domestic assets as available with existing lenders, both CDR and non-CDR lenders (excluding offshore securities) and escrowing the receivables from the identified projects.

viii) Rs.614.10 Crore (previous year: Rs Nil) secured by first pari-passu charge on all current assets (except for land considered as stock in trade) and first pari-passu charge on all property, plant and equipment and this isshown in shortterm borrowings.

Since the date of issuance, bonds equivalent to USD 374.92 Million of July 2019 have been converted into shares by March 31, 2018. The bond holders have exercised their rights to convert bonds of USD 75.82 million (previous year: USD 1 Million) of July 2019 bonds during the year.

* The effective rate of interest on longterm borrowings ranges between 11% p.a. to 15% p.a. and on short-term borrowing ranges between 8.75% to 12.75% during the year, depending upon the prime lending rate ofthe banks and financial institutions at the time of borrowing, wherever applicable, and the interest rate spread agreed with the banks.

e) A financial institution has converted interest of Rs 53.75 Crore (previous year: Rs 46.65 Crore) to long-term borrowings.

** Includes expenditure booked under various expenditure heads by their nature.

Performance guarantee (‘PG’) represents the expected outflow of resources against claims for performance shortfall expected in future over the life of the guarantee assured. The period of performance guarantee varies for each customer according to the terms of contract. The key assumptions in arriving at the performance guarantee provisions are wind velocity, plant load factor, grid availability, load shedding, historical data, wind variation factor etc.

Operation, maintenance and warranty (‘O&M’) represents the expected liability on account of field failure of parts of WTG and expected expenditure of servicing the WTGs over the period of free operation, maintenance and warranty, which varies according to the terms of each sales order.

Liquidated damages (‘LD’) represents the expected claims which the Company may need to pay for non-fulfilment of certain commitments as per the terms ofthe respective sales / purchase contracts. These are determined on a case to case basis considering the dynamics of each contract and the factors relevant to that sale.

The figures shown against ‘Utilisation’ represent withdrawal from provisions credited to statement of profit and loss to offset the expenditure incurred during the year and debited to statement of profit and loss.

c. Details of carry forward losses and unused credit on which no deferred tax asset is recognised by the Company are as follows:

Unabsorbed depreciation can be carried forward indefinitely. Business loss and capital loss can be carried forward for a period for 8 years from the year in which losses arose. MAT credit can be carried forward up to a period of 15 years. Majority ofthe business loss will expire between March 2020 to March 2022. Majority ofthe capital loss will expire between March 2024 to March 2025. MAT creditwill expire between March 2022 to March 2023.

Defined benefit plan:

The Company has a defined benefit gratuity plan. Every employee who has completed five or more years of service is eligible for gratuity. Gratuity is computed based on 15 days salary based on last drawn salary for each completed year of service. The scheme is partially funded with an insurance company in the form of a qualifying insurance policy.

For the year ending on March 31, 2019 the Company expects to contribute Rs 16.82 Crore (previous year: Rs 5.38 Crore) towards its defined benefit plan.

The average duration of the defined benefit plan obligation at the end of the reporting period is 8 years (previous year: 10 years).

8. Share-based payments

Employees Stock Option Plan 2009

The Scheme shall be applicable to the Company, subsidiary companies and may be granted to the permanent Employees of the Company or its subsidiaries or its holding company, as determined by the Compensation Committee. Once the Options vest as per the Schedule, they would be exercisable by the option holder and the shares arising on exercise of such Options shall not be subject to any lock-in period provided however that the shares allotted on such exercise cannot be sold for a period of 30 days from the date of allotment in terms ofthe Insider Trading Code ofthe Company. The exercise price for the purposes ofthe grant of options shall be 20% discount to the closing price ofthe equity shares ofthe Company on the Bombay Stock Exchange Limited on the date ofthe grant. The Employee Stock Options granted shall be capable of being exercised within a period of five years from the date of first vesting. Payment ofthe Exercise Price shall be made by a crossed cheque or a demand draft drawn in favour ofthe Company, or in such other manner as the Compensation Committee may decide.

Employees Stock Option Plan 2014

The Scheme shall be applicable to the Employees ofthe Company, its Subsidiary Companies in India and abroad, any successor company thereof and may be granted to the Employees ofthe Company and its Subsidiary Companies, as determined by the Nomination and Remuneration Committee. Options granted under this Scheme would vest in tranches not earlier than one year and not later than a maximum of three years (Revised to five years) from the date of grant of such options. Vesting of Options would be subject to continued employment with the Company or Subsidiary Companies, as the case maybe, and thus the Options would vest on passage of time. The Options would be granted at an Exercise Price equal to the closing market price of the Shares of the Company or certain discount to the closing market price on the NSE on the date of grant or such other price as may be decided by the Nomination and Remuneration Committee. Once the Options vest as per the Schedule, they would be exercisable by the option holder and the shares arising on exercise of such Options shall not be subjectto any lock-in period provided however that the shares allotted on such exercise cannot be sold for a period of 30 days from the date of allotment in terms ofthe Insider Trading Code ofthe Company. The Employee Stock Options granted shall be capable of being exercised within a period of three years (Revised to five years) from the date of first vesting. Payment ofthe Exercise Price shall be made by a crossed cheque ora demand draft drawn in favour ofthe Company, or in such other manner as the Nomination and Remuneration Committee may decide.

9. Operating leases

The Company has taken certain premises under operating leases.

Expenses under cancellable operating lease and rental contracts during the year is Rs 27.47 Crore (previous year: Rs 34.64 Crore).

Expenses under non-cancellable operating lease and rental contracts during the year is Rs9.98 Crore (previousyear: Rs 9.48 Crore).

Future minimum rentals payable under non-cancellable operating lease and rental contracts as per the respective agreements are as follows:

* includes demand from tax authorities for various matters. The Company/tax department has preferred appeals on these matters and the same are pending with various appellate authorities. Considering the facts ofthe matters, no provision is considered necessary by management.

Few customers of the Company has disputed certain amount as receivable which the Company believes is contractually not payable. These matters are pending for hearing before respective courts, the outcome of which is uncertain. The management has provided for an amount as a matter of prudence which it believes shall be the probable outflow of resources.

The Company has stood as co-borrower for loans granted to the Company and its fellow subsidiaries for which certain securities defined in Note 21(b) are provided, the amount of which liability of each of parties is not ascertainable.

10. Disclosure required under Sec 186(4) of the Companies Act, 2013

For details of loans and guarantees given to related parties refer Note 44 and Note 41.

For details of securities provided on behalf of borrowers under the CDR package refer Note 21(a) and Note 21(b).

For details of investments made refer Note 11.

11. Segment information

As permitted by paragraph 4 of Ind AS-108, ‘Operating Segments’, if a single financial report contains both consolidated financial statements and the separate financial statements ofthe parent, segment information need to be presented only on the basis ofthe consolidated financial statements. Thus, disclosures required by Ind AS-108 are given in consolidated financial statements.

i. Under liquidation.

ii. Sold during the year.

iii. Liquidated during the year.

B. Other related parties with whom transactions have taken place during the year

a. Entities where Key Management Personnel (‘KMP’) / Relatives of Key Management Personnel (‘RKMP’) have significant influence (EKMP)

Aarav Renewable Energy, Aspen Infrastructures Limited, BrijWind Energy, Girish R. Tanti (HUF), PT Wind Energy, Rajan Renewable Energy, Sandla Wind Project Private Limited, Sarjan Realities Limited, Saroja Renewables Limited, SE Freight & Logistics India Private Limited, Shanay Renewables Limited, Shubh Realities (South) Private Limited, Skeiron Renewable Energy Amidyala Limited, Skeiron Renewable Energy Kustagi Limited, Skeiron Renewable Energy Private Limited, Sugati Beach Resort Private Limited, Suzlon Foundation”, Skeiron Green Power Private Limited (formerly known as Suzlon Green Power Private Limited), Synefra Infrastructures Private Limited and Windforce Management Services Private Limited.

i. Ceased w.e.f. October 01, 2016

b. Key Management Personnel (KMP)

BrijMohan Sharma, Girish R. Tanti, Hemal Kanuga, Jayarama Prasad Chalasani, Kirti J. Vagadia, Marc Desaedeleer, Medha Joshi(ii), Per Hornung Pedersen, Pratima Ram, Rajiv Jha(iii), Ravi Uppal, Sanjay Baweja(iv), Sunit Sarkar(v), Tulsi R. Tanti, Vaidhyanathan Raghuraman, Venkataraman Subramanian, Vijaya Sampath and Vinod R. Tanti

ii. Ceased w.e.f. November 11, 2016

iii. Ceased w.e.f. April 06, 2018

iv. Ceased w.e.f. October 04, 2017

v. Ceased w.e.f. January 01, 2018

c. Relatives of Key Management Personnel (RKMP)

Nidhi T. Tanti, Sanyogita P. Tanti

d. Employee funds

Superannuation fund

Employees company gratuity scheme

Terms and conditions of transactions with related parties

Outstanding balances at the year-end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. This assessment is undertaken each financial year through examining the financial position ofthe related party and the market in which the related party operates.

12. Fair value measurements

Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments that are recognised in the financial statements

The carrying amounts of cash and cash equivalents, trade receivables, trade payables, and other current liabilities are considered to be same as their fair values, due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

- Non-current investments

The fair value of investments in unquoted redeemable cumulative preference shares has been estimated using the discounted cash flow (‘DCF’) model. The valuation requires the management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities ofthe various estimates within the range can be reasonably assessed and are used in management’s estimate of fair valueforthese unquoted instruments.

- Current investments

The Company’s current investments consist of investment in units of mutual funds and unquoted investments in compulsory convertible debentures. The fair value of investments in mutual funds is derived from the NAV of the respective units in the active market at the measurement date. Investment in debentures have been classified as equity instruments measured at cost as per Ind AS 27.

13. Fair value hierarchy

There are no transfers between level 1 and level 2 during the year and earlier comparative periods. The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end ofthe reporting period.

The following table provides the fair value measurement hierarchy of the Company’s assets:

14. Financial risk management

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPL investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk which may adversely impact the fair value of its financial instruments. The Company has constituted an internal Risk Management Committee (‘RMC’), which is responsible for developing and monitoring the Company’s risk management framework. The focus ofthe RMC is that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Risk Management Policy is approved bythe Board ofDirectors.

a. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and price risk, such as commodity risk. The Company’s exposure to market risk is primarily on account of interest risk and foreign currency risk. Financial instruments affected by market risk include loans and borrowings, FVTPL investments and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017.

i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Recompense liability payable by the Company to CDR lenders could be affected due to changes in market interest rate (refer Note 3(b)).

ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cashflows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency) and the Company’s borrowings and loans and investments in foreign subsidiaries.

The Company’s exposure to foreign currency risk as at the end ofthe reporting period expressed in INR are as follows:

Foreign currency sensitivity

The Company’s currency exposures in respect of monetary items at March 31, 2018, March 31, 2017 that result in net currency gains and losses in the income statement and equity arise principally from movement in US Dollar and Euro exchange rates.

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant. The Company’s exposure to foreign currency changes for all other currencies is not material. The other currencies includes Australian Dollar, Great Britain Pound, Danish Kroner etc.

*Effect on profit before tax is calculated without considering the impact of accumulation and amortisation of exchange differences on long term foreign currency monetary items to FCMITDA.

b. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities (primarily loans). The Company consistently monitors the financial health of its customers and sales proceeds are being realised as per the milestone payment terms agreed to minimise the loss due to defaults or insolvency ofthe customer. Progressive liquidity management is being followed to de-riskthe Company from any non-fulfilment of its liabilities to various creditors, statutory obligations, or any stakeholders.

i) Trade receivables

The Company’s exposure to trade receivables is limited due to diversified customer base. The Company consistently monitors progress under its contracts with customers and sales proceeds are being realised as per the milestone payment terms agreed to minimise the loss due to defaults or insolvency of the customer.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively.

Refer Note 2.3(p) for accounting policy on financial instruments.

ii) Financial instruments

Financial instruments that are subject to concentrations of credit risk primarily consist of cash and cash equivalents, term deposit with banks, investment in mutual funds, loans given to subsidiaries and other financial assets. Investments of surplus funds are made only with approved counterparties and within credit limits assigned.

The Company’s maximum exposure to credit risk as at March 31, 2018 and as at March 31, 2017 is the carrying value of each class of financial assets.

c. Liquidity risk

Liquidity risk refers to that risk where the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirement. In doing this, management considers both normal and stressed conditions. The Company manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring cash flow forecast and by matching the maturity profiles of financial assets and liabilities. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the contractual maturity profile of the Company’s financial liabilities based on contractual undiscounted payment:

15. Capital management

For the purpose ofthe Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise shareholder value.

The capital structure ofthe Company is based on the management’s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence. The calculation ofthe capital for the purpose of capital management is as below.

16. The employee benefits expense and other expenses includes expenses of Rs 87.28 Crore (previous year: Rs 105.14 Crore) pertaining to research and development.

17. Deferral of exchange differences

The Company has, consequent to the notification issued by the Ministry of Corporate Affairs on December 29, 2011 giving an option to the companies to amortise the exchange differences pertaining to long term foreign currency monetary items up to March 31, 2020 (from March 31, 2012 earlier), adopted the said option given under paragraph 46A of Accounting Standard 11. Accordingly, the Company has revised the amortisation period for such items to the maturity ofthe long term foreign currency monetary items (all before March 31, 2020).

Net foreign exchange loss aggregating Rs 4.40 Crore (previous year: gain of Rs 26.24 Crore) on long term foreign currency monetary items have been adjusted in the foreign currency monetary item translation difference account during the year. Further, foreign exchange loss aggregating Rs 27.86 Crore (previous year: Rs 45.86 Crore) have been amortised during the year.

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