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NOTES TO ACCOUNTS

GE Power India Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 5069.96 Cr. P/BV 5.75 Book Value (₹) 131.18
52 Week High/Low (₹) 938/684 FV/ML 10/1 P/E(X) 67.24
Bookclosure 23/07/2019 EPS (₹) 11.22 Div Yield (%) 0.80
Year End :2018-03 

1. RELATED PARTY

List of related parties Parties with whom control exists:

General Electric Company, United States (Ultimate Holding Company)

Alstom India Tracking BV (Immediate Holding Company)

Parties controlled by the Company (Subsidiaries)

GE Power Boilers Services Limited, India

Alstom Boilers India Limited, India (dissolved w.e.f 17 October 2016)

Key managerial personnel (KMP)

Mr. Vishal Keerti Wanchoo - Chairman & Non-Executive Director (w.e.f 30 May 2017)

Mr. Andrew H DeLeone - Non-Executive Director (w.e.f. 20 June 2017) and Managing Director (w.e.f. 1 August 2017)

Mr. Sanjeev Agarwal - Whole Time Director (w.e.f. 30 May 2017)

Mr. Arun Kannan Thiagarajan - Non-Executive & Independent Director Ms. Neera Saggi - Non-Executive & Independent Director Dr. Uddesh Kumar Kohli - Non-Executive & Independent Director Mr. Ashok Ganesan - Managing Director (up to 31 May 2017)

Other related parties with whom transactions have taken place during the year (fellow subsidiaries/associates)

ACC - Babcock Staff Provident Fund, ALSTOM (Thailand) Ltd, ALSTOM Arabia Power Factory Co. Ltd, Alstom Bharat Forge Power Private Limited (now known as GE Power systems India Private Limited) , ALSTOM General Turbo SA, ALSTOM Infrastructure Romania srl, ALSTOM International Mobility Management AG, ALSTOM IS&T, ALSTOM Limited, ALSTOM Management SA, ALSTOM Mexicana S.A. de C.V., ALSTOM Portugal, S.A., ALSTOM Power Canada Inc., ALSTOM Power Conversion, ALSTOM Power Inc., ALSTOM Power Italia S.p.A., ALSTOM Power Service, ALSTOM Power Service (Pty) Ltd, ALSTOM Power Systems, Alstom Power, S.A.U., ALSTOM Renewable Austria GmbH, ALSTOM Renewable Hydro Spain, S.L.U., ALSTOM Renewable Malaysia Sdn Bhd, ALSTOM Renewable Rus Ltd, Alstom Renovables Espana S.L., ALSTOM S&E Africa Proprietary Limited, ALSTOM Saudi Arabia Transport and Power Ltd, ALSTOM Technical Services (Shanghai) Co., Ltd, ALSTOM Thermal Maroc, ALSTOM Thermal Power Belgium, ALSTOM Thermal Service Chile SpA, Bently Nevada Inc., Dresser Valve India Private Limited , FieldCore Service Solutions , GE (Shanghai) Power Technology Co. Ltd., GE Boiler Deutschland GmbH, GE Cairo, GE Contractual Services General Electric Company, GE Drives & Controls Inc., GE Egypt, GE Energias Renovaveis Ltda., GE Energy Products France SNC, GE Enerji Endustri Ticaret ve Servis Anonim Sirketi, GE Gas Turbines L.L.C., GE Global Parts & Products GmbH, GE Hungary Kft., GE Hydro France, GE India Exports Pvt Ltd, GE India Industrial Private Limited, GE Intelligent Platforms, GE Intelligent Platforms Asia Pacific Pte. Ltd., GE Intelligent Platforms Private Limited, GE International INC., Saudi Arabia, GE Middle East FZE, GE Nederland BV, GE Nigeria, GE Oil & Gas India Private Limited, GE Power AG, GE Power Australia Pty Ltd, GE Power Boilers Services Limited, GE Power Estonia AS, GE Power Finland Oy, GE Power NewZeland Ltd., GE Power Norway AS, GE Power Philippines, Inc., GE Power Service (Hong Kong) Limited, GE Power Service Korea Ltd., GE Power Services (I) Private Limited, GE Power Services (Malaysia) Sdn. Bhd., GE Power Solutions (Malaysia) Sdn. Bhd., GE Power Solutions Japan K.K., GE Power Sp.z.o.o., GE Power Sweden AB, GE Power Taiwan Ltd., GE Power Vietnam Company Limited, GE Renewable (Switzerland) GmbH, GE Renewable Energy Canada Inc., GE Renewable R&D India Private Limited, GE Renewable Sweden AB, GE Renewable Technologies, GE Strongwish Automation & Controls Technology Development (Shenzhen) Co. Ltd., GE Switzerland GMBH, GE T&D India Limited, GE WIND France SAS, General Electric (Switzerland) GmbH, General Electric Company, General Electric Energy UK Limited, General Electric Global Services, General Electric Global Services GmbH, General Electric International Inc., General Electric Technology GmbH, Granite Services International India Pvt Ltd, Grid Equipments Private Limited, Grid Solutions SAS, PT General Electric Power Solutions Indonesia, Wipro GE Healthcare Private Limited, Wuhan Boiler Company Limited, Wurldtech Security Technologies, Ltd, PT General Electric Power Solutions Indonesia, Wipro GE Healthcare Private Limited, Wuhan Boiler Company Limited, Wurldtech Security Technologies, Ltd.

Joint venture under the common control of the Ultimate Holding Company

NTPC GE Power Services Private Limited

2. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, a company needs to spend at least two per cent of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A ‘Corporate Social Responsibility’ (CSR) Committee has been formed by the company as per the act. The CSR Committee and Board had approved the projects with specific outlay on the activities as specified in Schedule VII of the Act, in pursuance of the CSR Policy.

a) Gross amount required to be spent by the Company during the year is H 10.2 million (previous year H 19.7 million)

b) Amount spent during the year on :

3. CAPITAL AND OTHER COMMITMENTS

40.1 Estimated amount of contracts remaining to be executed on capital account and not provided for net of advances-H32.7 million

(31 March 2017 : H 83.6 million)

40.2 For commitments relating to lease arrangements, refer note 36 above and for other commitments refer note 2.14.

40.3 Company has working capital facilities from:

a) Canara bank which is secured by first charge on pari passu basis by way of hypothecation of stocks and receivables of the Company on first pari passu basis with other banks under multiple banking arrangement. Available limit is H 150 million (31 March 2017 : H 150 million).

b) ICICI bank which are secured by first charge on pari passu basis on the entire stocks and such other movables including book debts, bills, whether documentary or clean, both present and future. Available limit is H 100 million (31 March 2017 : H 100 million).

Based on the favorable decision in similar cases / legal opinions taken by the Company / discussions with the solicitors etc., the Company believes that it has good cases in respect of all the items listed under (a) and (b) above and hence no provision there against is considered necessary.

It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

The Company does not expect any reimbursements in respect of the above contingent liabilities.

4. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - ACCOUNTING CLASSIFICATION

A. Accounting classifications and fair values

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair value :

1 Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.

2 Fair value of non-current financial assets which includes security deposit has not been disclosed as there is no significant differences between carrying value and fair value.

3 Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

The following tables shows the carrying amounts and fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy.

For fair value hierarchy refer note 2.1.5.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

5. FINANCIAL RISK MANAGEMENT

Financial risk relates to Company’s ability to meet financial obligations and mitigate exposure to broad market risks, including volatility in foreign currency exchange rates and interest rates and commodity prices; credit risk; and liquidity risk, including risk related to our credit ratings and our availability and cost of funding. Credit risk is the risk of financial loss arising from a customer or counterparty failure to meet its contractual obligations. The Company face credit risk in our industrial businesses, as well as in derivative financial instruments activities. Liquidity risk refers to the potential inability to meet contractual or contingent financial obligations (whether on- or off-balance sheet) as they arise, and could potentially impact Company financial condition or overall safety and soundness.

(A) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the receivables from customers; loans and deposits.

The carrying amounts of financial assets represent the maximum credit risk exposure.

(i) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate.

The Company also regularly assess customer credit risk inherent in the carrying amounts of receivables and contract costs and estimated earnings, including the risk that contractual penalties may not be sufficient to offset our accumulated investment in the event of customer termination. The Company also gain insight into future utilization and cost trends, as well as credit risk, through our knowledge of the installed base of equipment and the close interaction with our customers that comes with supplying critical services and parts over extended periods.

The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

A 1 : High-quality assets, negligible credit risk A 2 : Quality assets, low credit risk A 3 : Standard assets, moderate credit risk A 4 : Substandard assets, relatively high credit risk A 5 : Low quality assets, very high credit risk A 6 : Doubtful assets, credit-impaired

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.

A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined by considering the business environment in which entity operates and other economic factors.

(a) Expected credit loss on financial assets other than trade receivables :

With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible or nil and accordingly no provision for expected credit loss has been provided on these financial assets. Break up of financial assets other than trade receivables have been disclosed on balance sheet.

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company also monitors the level of expected cash inflows on trade receivables and loans (comprising the undrawn borrowing facilities) together with expected cash outflows on trade payables and other financial liabilities.

(ii) Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements.

(C) Market risk

Market risk is the risk of loss of future earnings, fair value or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.

(i) Foreign currency risk

The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and Euro. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows.

The Company uses the Fx forward instruments to hedge foreign exchange exposures.

Project exposures are hedged to a minimum of 75% once they are contractually binding, and hedges should match the associated cash flows and the contractually stipulated maturities of the project.

The Company designate entire forward contract at forward rate as the hedging instrument. Changes in the full fair value of the forward contract are accounted for through statement of profit and loss in accordance with the type of hedge (fair value hedge).

Price risk

The Company’s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI (note 44)

At the reporting date, the exposure to unlisted equity securities at fair value was H26.7 million. A decrease of 10% or increase of 10% in fair value of unlisted equity securities could have an impact of approximately H2.6 million on the OCI or equity. These changes would not have an effect on statement of profit and loss.

# The Company has determined the stage of completion of contracts on the basis of contract milestones which reflects the physical proportion of contract being completed.

* Percentage of completion method

(ii) The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.

6. CAPITAL MANAGEMENT

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of dividends to equity shareholders.

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security afforded by a sound capital position.

The Company is having Nil borrowings as on 31 March 2018 (31 March 2017 : Nil).

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