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Tata Power Company Ltd.

BSE: 500400 Sector: Infrastructure
NSE: TATAPOWER ISIN Code: INE245A01021
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OPEN 70.60
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VOLUME 29401
52-Week high 101.75
52-Week low 66.65
P/E 16.11
Mkt Cap.(Rs cr) 18,961
Buy Price 70.15
Buy Qty 508.00
Sell Price 70.25
Sell Qty 2311.00
OPEN 70.60
CLOSE 69.95
VOLUME 29401
52-Week high 101.75
52-Week low 66.65
P/E 16.11
Mkt Cap.(Rs cr) 18,961
Buy Price 70.15
Buy Qty 508.00
Sell Price 70.25
Sell Qty 2311.00

Tata Power Company Ltd. (TATAPOWER) - Director Report

Company director report

To the Members

The Directors are pleased to present to you the Ninety-Ninth AnnualReport on the business and operations of your Company along with the audited FinancialStatements of Account for the year ended 31st March 2018.

1. FINANCIAL RESULTS

Figures in Rs. crore (Table 1)

Standalone

Consolidated

FY18 FY17# FY18 FY17#
(a) Net Sales/Income from Other Operations* 7301 6769 28921 27286
(b) (Less): Operating Expenditure (4924) (4651) (22860) (21585)
(c) Operating profit 2377 2118 6061 5701
(d) (Less)/: Forex Loss/(Gain) (excluding Forex Loss/(Gain) on Borrowings) (20) (23) (114) (94)
(e) Add: Other Income 929 995 433 586
(f) (Less): Finance Cost (including Forex Loss/(Gain) on Borrowings) (1431) (1319) (3723) (3365)
(g) profit before depreciation and Tax 1855 1771 2657 2828
(h) (Less): Depreciation/Amortisation/Impairment (663) (605) (2398) (1956)
(i) profit before Share of profit of Associates and Joint Ventures 1192 1166 259 872
(j) Add: Share of Profit of Associates and Joint Ventures - - 1554 1226
(k) profit before Exceptional items 1192 1166 1813 2098
(l) (Less)/Add: Exceptional Items (4437) (651) 1102 (651)
(m) profit/(Loss) before Tax (3245) 515 2915 1447
(n) (Less)/Add: Tax Expenses or Credit 166 (120) (164) (350)
(o) Net profit/(Loss) after Tax from continuing Operations (3079) 395 2751 1097
(p) Profit/(Loss) before Tax from Discontinued Operations (86) 16 (86) 16
(q) (Less)/Add: Tax Expenses or Credit from Discontinued Operations 14 (13) 14 (13)
(r) Net profit/(Loss) after Tax from discontinued Operations (72) 3 (72) 3
(s) Net profit/(Loss) for the year (3151) 398 2679 1100
(t) Net profit/(Loss) for the year Attributable to -
- Owners of the Company (3151) 398 2477 897
- Non-controlling interests - - 202 203
(u) Other Comprehensive income (Net of Tax) 45 (122) 94 (133)
(v) Total Comprehensive income (3106) 276 2773 967
Attributable to -
- Owners of the Company (3106) 276 2571 764
- Non-controlling interests - - 202 203

including rate regulatory income/(expense)

#Restated - Refer notes to standalone/consolidated financial statements

2. Financial PERFORMANCE AND THE STATE OF THE COMPANY'S affairs

2.1. Consolidated

On a Consolidated basis the Operating Revenue was at ? 28921 crore inFY18 compared to ? 27286 crore in FY17. The increase was mainly due to higher revenuefrom the renewables portfolio and higher fuel cost being passed through for the regulatedbusiness.

The Consolidated Profit after Tax in FY18 was at ? 2679 crore comparedto ? 1100 crore in the previous year mainly due to higher contribution by the coal minesrenewables business and associates lower foreign exchange losses recognition of deferredtax assets of certain investments treated as held for sale and reversal of impairmentprovisions of Coal Companies made in earlier years. This was partly offset by loss towardscontractual obligation on account of purchase of shares in Tata Teleservices Limited(TTSL) from NTT DoCoMo Inc. Japan (Docomo). [Refer Section 10 - Management Discussion andAnalysis (MD&A) of this report for details]

2.2. STANDALONE

On a Standalone basis the Operating Revenue stood at ? 7301 crore inFY18 compared to ? 6769 crore in FY17. The increase was mainly due to higher fuel costand power purchase cost being passed through for the regulated business.

The loss in FY18 was at ? 3151 crore as compared to profit of ? 398crore last year. This was mainly due to impairment provisions made for investments inCoastal Gujarat Power Limited (CGPL) hydro projects in overseas locations and impairmentof a unit of Trombay Generating Station. This was partly offset by deferred tax assetsrecognised on certain investments treated as held for sale.

The Earnings per Share (Basic and Diluted) in FY18 stood at ? 4.34before exceptional items and at ? (12.05) after exceptional items.

(Refer Section 9 - MD&A of this report for details)

2.3. EXCEPTIONAL ITEM

CGPL-Coal Mines SBU: The Board after considering the fact that theIndonesian coal mines were acquired to supply coal to CGPL as also to act as a hedge forthe coal price risk that the CGPL PPA exposes it to and considering that the hedge hasconsistently performed well on an overall basis has approved treating both as a singlecash generating unit. This has a significant impact on how the impairment of the combinedCGU is assessed. The past year has shown a consistent increase in the price of coal andthis is expected to persist for the foreseeable future. Having regard to this animpairment of the investment in CGPL has had to be recognized. In addition a reassessmentof electricity prices predicted for the post Power Purchase Agreement (PPA) period alsohas had a negative impact on the value of CGPL.

The combined effect of these two has resulted in an impairment of '3555 crore of the investment in CGPL in the standalone accounts. This is because unlikein the consolidated accounts in the standalone accounts each investment must be impairedon its own without setting off the appreciation in other investments and also because inthose accounts the investments are carried at cost or lower.

However in the consolidated accounts the impact is not the samebecause the losses incurred by CGPL in past years have already been recognized in thoseaccounts over the years. On the other hand the increase in coal prices has resulted in apositive impact on the value of the coal mines investment making it possible to reversean impairment of ' 1887 crore accounted for in earlier years when the long-termprediction for coal prices was well below the revised current prediction.

It may be noted that several assumptions are involved in arriving atthe above provisions.

Georgia Hydro Power Project: The standalone accounts contain animpairment provision for the investment in and commitment to Tata Power InternationalPte. Ltd.

(TPIPL) a wholly owned subsidiary which had invested in a jointventure company setting up a Hydro power plant in Georgia aggregating to ' 675 crore dueto depressed power prices in the open market in Turkey coupled with the devaluation ofTurkish Lira as also because of a tunnel collapse that has led to a delay in thecommercial operation of the plant apart from higher project cost.

The corresponding provision in the consolidated accounts is ' 528 crorebecause operating losses have been recognized in the profit and loss account for thedifference.

Tata Teleservices Ltd.: A provision has been made for damages of ' 107crore towards contractual obligation representing mark to market loss on change in thevalue of put option on the equity shares of TTSL in both the standalone as also theconsolidated accounts.

Trombay: Your Company has recognized an impairment loss of ' 100 crore(in both the standalone as also the consolidated accounts) for one of its units of theTrombay Thermal Power Station consequent on the expiry of its PPA at the end of FY19 withno scope currently existing for finding a buyer for its power.

others (only in the consolidated accounts): Impairment of ' 38 crorefor the carrying amount of Rithala power plant in Tata Power Delhi Distribution Limiteddue to no likelihood of its operation with gas not being available at administered pricesand the partial disallowance of tariff by DERC (appealed against).

Goodwill of '12 crore has been written down in solar power plantacquired by the company consequent on the value for which it was incurred having beenrealized.

2.4. ANNUAL PERFORMANCE

Details of the Company's annual financial performance as published onthe Company's website and presented during the Analyst Meet after declaration of annualresults can be accessed using the following link: https://www.tatapower.com/pdf/investor-relations/analyst-presentation-may-18.pdf (alternately scan the adjacent QR code using a mobile deviceto read the file on the Company website).

3. DIVIDEND

Based on the Company's performance the Directors of your Companyrecommend a dividend of 130% (? 1.30 per share of ? 1 each) subject to the approval ofthe Members.

According to Regulation 43A of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations) the top 500 listed entities based on market capitalization calculated as on31st March of every financial year are required to formulate a dividend distributionpolicy which shall be disclosed in their annual reports and on their websites.Accordingly the Dividend Policy of the Company is provided in Annexure-I.

The Dividend Policy of the Company can be accessed using the followinglink: https://www.tatapower.com/aboutus/dividend-policy.pdf (alternately scan the adjacent QR code using a mobile device to read the policy on theCompany website).

4. CURRENT BUSiNESS

Your Company is present across the value chain of power business viz.Generation Transmission Distribution

Power Trading Power Services Coal Mines and Logistics SolarPhotovoltaic (PV) manufacturing and associated Engineering Procurement & Construction(EPC) services.

As on 31st March 2018 the Tata Power group of companies had anoperational generation capacity of 10757 MW from various fuel sources - thermal (coalgas and oil) hydroelectric renewable energy (wind and solar PV) and waste heat recoverydetails of which are given below in Table 2.

Currently the Company (including its subsidiaries) has nearly 32% ofits capacity (in MW terms) in clean and green generation sources (hydro wind solar andwaste heat recovery). The Company is targeting 40-50% of its total generation capacityfrom non-fossil fuel based generation sources by 2025.

Details of generation businesses in operation

(Table 2)

Fuel Source State Location Normative Capacity (MW) returns / earnings model Category total (MW)
Gujarat Mundra 4150 Long term PPA based on UMPP Bid 7340
Maharashtra Trombay 1430 Extension of Long term PPA - regulated Return on Equity
Jharkhand Maithon 1050 Long term PPA - regulated Return on Equity
Thermal - Coal / Oil / Gas Jharkhand Jojobera 428 Long term PPA - regulated Return on Equity and negotiated PPA for Captive Arrangement
Jharkhand IEL - Jojobera 120 Bilaterally negotiated long term PPA
Indonesia PT Citra Kusuma Perdana 54 Captive arrangement
New Delhi TPDDL - Rithala (Gas based) 108 PPA is being pursued
Thermal - Waste Heat Recovery Jharkhand IEL - Jamshedpur 120 Bilaterally negotiated long term PPA 375
Odisha IEL - Kalinganagar 135 Bilaterally negotiated long term PPA
West Bengal Haldia 120 Merchant sale (100 MW) and bilateral sale to West Bengal (20 MW)
Maharashtra Bhira 300 Long term PPA - regulated Return on Equity 693
Maharashtra Khopoli 72
Hydro Maharashtra Bhivpuri 75
Bhutan Dagachhu 126 Merchant
Zambia ItezhiTezhi 120 Long term regulated return
Renewables Maharashtra Gujarat Madhya Pradesh Karnataka Tamil Nadu Rajasthan Andhra Pradesh and South Africa Wind farms 1161 Long Term PPA based on Feed-in-tariff + REC Mechanism 2349
Renewables Andhra Pradesh Bihar Delhi Gujarat Haryana Jharkhand Karnataka Madhya Pradesh Punjab Rajasthan Tamil Nadu Telangana Uttar Pradesh Solar Photovoltaic (PV) 1188 Long Term PPA based on Feed-in-tariff 2349
Total 10757

Details of other businesses (Table 3)

Business Company/Entity/Parent Company Returns/Earnings Model Key details
Tata Power (TPC - T) Mumbai 25 year license w.e.f August 2015 - regulated Return on Equity Over 1188 Ckms. of transmission lines connecting generating stations to 21 receiving stations.
Transmission Powerlinks Transmission Limited (PTL) Regulated Return on Equity 2328 Ckms. of 400 kV transmission lines to evacuate power from Eastern/North Eastern region to Northern Region.
Tata Power (TPC - D) Mumbai 25 year license w.e.f August 2015- Regulated Return on Equity Over 4500 Ckms. of distribution network. Around 6.80 lakh consumers.
Distribution Tata Power Delhi Distribution Limited (TPDDL) Regulated Return on Equity Approximately 15081 Ckms. of distribution lines. Over 16.5 lakh consumers.
Tata Power Ajmer Distribution Limited (TPADL) Distribution Franchise model Over 2130 Ckms. of network length. Around 1.34 lakh consumers.
Coal Investments Coal and Infrastructure Indonesia Returns based on dynamics in International thermal coal market Stake in Indonesian mines.
Solar PV manufacturing EPC Tata Power Solar Systems Limited (TPSSL) Returns based on sector dynamics and market competition Manufacturing and sale of solar PV cells and modules and EPC services.
Power Trading Tata Power Trading Company Limited (TPTCL) Returns based on market dynamics in short term and bilateral power market subject to cap prescribed by CERC Category I power trading license which permits the company to trade any quantum of power.
Shipping Trust Energy Resources Pte Limited Singapore (TERPL) Returns based on long term charters Vessels operated are of cape size.
Power Services Tata Power Returns based on sector dynamics and market competition A leading service providers of project management O&M and specialized services in the power sector.

Percentage contribution of different business models (excludes underconstruction) (Table 4)

Model capacity (MW) % of overall capacity returns Bussiness/Division
Fixed Return on Equity 3724 34.7 1) Regulated Return on Equity 1) Mumbai Operations (Trombay & Hydro) Maithon Jojobera Unit #2 and #3 TPDDL Rithala
2) Bilateral captive agreement 2) IEL (Unit 5 PH6 KPO) CKP
3) PPA Driven (Indonesia) 3) Haldia (20 MW)
Fixed Tariff (Renewables) 2349 21.8 Feed-in-tariff + Bid Driven Wind and Solar projects
Fixed Tariff (Conventional Generation) 4458 41.4 Bilateral agreement + Bid Driven Jojobera Unit#1 and #4 CGPL ITPC (Zambia)
Merchant 226 2.1 Market driven Haldia (100 MW) Dagachhu (126 MW)

4.1. SALE OF STRATEGiC ENGiNEERiNG DiViSiON (SED)

The Board has decided to sell its Defence business StrategicEngineering Division (SED) to Tata Advanced Systems Limited a wholly owned subsidiary ofTata Sons Limited at an enterprise value of ? 2230 crore. SED engaged in the business ofindigenous design development production integration supply and life cycle support ofmission critical defence systems. This will be subject to National Company Law Tribunal(NCLT) Ministry of Defence Competition Commission of India and shareholders approval.This business is not a core activity for your Company and it needs a different type ofrisk appetite and support to grow to its potential.

The transaction is proposed to be executed on a slump sale basis. Thevaluation of the business has been carried out by independent valuers appointed by theCompany. Further a fairness opinion on valuation has been taken from a Category-1Merchant Banker. The business value is mainly derived from future projections and ordershence the valuation has been structured into upfront payment and earn outs. The upfrontpayment has been agreed at an enterprise value of ? 1040 crore whereas the earnoutpayment of ? 1190 crore is subject to receipt of six identified orders spread over thenext 6 years. The upfront value will be adjusted for working capital changes and anyprofits or losses accrued till the time of closing.

5. SUBSiDiARiES/JOiNT VENTURES/ASSOCiATES

As on 31st March 2018 the Company had 50 subsidiaries (40 arewholly-owned subsidiaries) 37 Joint Ventures (JVs) and 8 Associates. Of the erstwhilesubsidiaries 3 companies have been classified as Joint Ventures under Indian AccountingStandards (Ind AS) and 1 of the investments has been classified as Associate.

During the year the following changes occurred in your Company'sholding structure:

• Subsidiaries: Chemical Terminal Trombay Limited an erstwhilesubsidiary of the Company merged with the Company during the year. The Companyincorporated Tata Power Ajmer Distribution Limited and Far Eastern Natural Resources LLC.

• There was no change in the holding structure of Joint Venturesand Associates during the year.

A report on the performance anfinancial position of each of thetsubsidiaries JVs and Associates has been provided in Form AOC-1.

The policy for determining material subsidiaries of theCompany can beaccessed using the following link: https://www.tatapower.com/pdf/ aboutus/policy-for-determining-material-subsidiaries.pdf(alternately scan the adjacent QR code using a mobile device to read the policy on theCompany website).

6. REsERVEs

The balance in the various reserves of the Company for FY18 and theprevious year are as follows:

Figures in Rs. crore (Table 5)

Particulars - Standalone As at 31st March 2018 As at 31st March 2017
Capital Redemption Reserve 1.85 1.85
Capital Reserve 61.66 61.66
Securities Premium Account 5634.98 5634.98
Debenture Redemption Reserve 1000.61 1000.90
General Reserve 3853.98 3853.98
Retained Earnings 1878.99 5361.42
Investment Revaluation Reserve (374.12) (2 53.40)
Statutory Reserve 660.08 660.08

7. FOREIGN EXCHANGE - EARNiNGS AND OUTGO

Figures in Rs. crore (Table 6)

Particulars - Standalone FY18 FY17
Foreign Exchange Earnings 398 340
Foreign Exchange Outflow mainly on account of: 1273 1263
• Fuel purchase 1087 971
• Interest on foreign currency borrowings NRI dividends 24 42
• Purchase of capital equipment components and spares and other miscellaneous expenses 162 250

8. REGULATORY AND LEGAL MATTERS

The businesses of the Company are governed primarily by the ElectricityAct 2003 (EA 2003) and associated regulations. Mentioned below are the criticalregulatory orders pertaining to the Company that were issued during FY18 none of whichimpact the 'going concern' status of your Company.

8.1. mundra umpp

8.1.1. compensatory tariff/force majeure relief

CGPL - Mundra UMPP approached the Central Electricity RegulatoryCommission (CERC) for evolving a mechanism for compensating CGPL for the adverse impact ofthe uncontrollable and unprecedented escalation in the imported coal prices and the changein law in Indonesia (Indonesian Government's decision to benchmark export coal pricesagainst international prices. The CERC after considering the recommendations of acommittee appointed for the aforesaid purpose vide its order dated 21st February 2014decided that CGPL was entitled to compensatory tariff from 1st April 2012 over and abovethe tariff agreed under the PPA with the Procurers till the hardship on account ofIndonesian regulations persisted.

The Procurers challenged the order and filed an appeal with theAppellate Tribunal for Electricity (APTEL) which passed an interim order dated 21st July2014 directing the Procurers to pay a compensatory tariff from March 2014 onwardsalthough it stayed the compensation for the prior period till disposal of the appealfiled before it. On appeal by the Procurers the interim order of APTEL was set aside bythe Supreme Court and APTEL was directed to hear and dispose of the appeals expeditiously.

On 7th April 2016 APTEL while rejecting the grounds of change in lawand use of regulatory powers remanded the matter to CERC to assess the compensation ongrounds of Force Majeure (FM) as permissible under the PPA.

The Procurers including a consumer group filed a Civil Appeal beforethe Supreme Court challenging the FM relief provided as per APTEL's judgement. The SupremeCourt directed that CERC may pass the order on FM relief but it was to be given effectonly with the prior permission of the Supreme Court. Based on the remand by APTEL thematter was heard by CERC and order passed on 6th December 2016 prescribing the FM reliefmechanism.

Subsequently the civil appeals filed by Procurers and consumer groupswere heard before the Supreme Court. The Supreme Court vide judgement dated 11th April2017 disposed of the appeal with regard to compensatory tariff inter alia holding that:

a) CGPL's case does not fall under the Force Majeure clause in the PPA

b) The Change in Law as defined under PPA contemplates only change indomestic (Indian) laws

The Supreme Court has however upheld that the CERC has powers underSection 79(1)(b) of EA 2003 to regulate which includes power to determine or adopttariff even for tariff that is determined under competitive bidding route (Section 63 ofEA 2003). While the Supreme Court held that the Regulatory Commission has the powersunder Section 79 of EA 2003 the judgement did not specifically validate theapplicability of said principle to the relief that had been granted by CERC to CGPLearlier.

The Company has been operating and maintaining the 4150 MW MundraUltra Mega Power Station which is operating at benchmark operational parameters and makinga significant contribution in ensuring the energy security of the country. While theCompany continues to make efforts to seek additional tariff and is engaged with variousstakeholders including the Central Government Procurers and the Lenders it is pursuingall alternative options at CGPL including sourcing of competitive coal from other relevantgeographies as also use low grade and blended coal options to contain the underrecovery atMundra UMPP. However with ever- increasing international coal prices the project isbecoming increasingly unviable. A large part of the investment made in the project is alsobeing considered for provisioning in the accounts.

Your Company is exploring all options for the long term sustainabilityof the power station and to structure the investment in a manner that it earns areasonable return.

8.1.2. CHANGE iN LAW

CGPL has filed petitions under Change in Law - Operations and Change inLaw - Construction before the APTEL against certain disallowances given by the CERC.

Additionally the CERC passed an order on 14th March 2018 allowingCompensation Cess on actual coal consumed based on Auditors Certificates. Any refundarising due to subsuming of other taxes in GST would need to be settled mutually betweenthe Generators and its Procurers.

8.1.3. PETiTiON SEEKiNG iN-PRiNCiPLE APPROVAL FOR cAPEx And oPEx TocoMPLY With NEW ENViRONMENT Norms

The Ministry of Environment Forest and Climate Change (MoEF&CC)vide its notification has revised the environment emissions norms mandating all thermalpower plants to comply with the same. Your Company had filed a petition with CERC seekingin-principle approval for the capital expenditure in order to secure finance from thefinancial institutions so as to comply with the new norms. The matter was heard beforeCERC to decide whether the above MoEF&CC notification falls under the Change in Law asper the PPA. However final directions from CERC are awaited.

8.2. MuMBAI oPERATioNs

8.2.1. multi year tariff (myt) orders of merc

MERC passed its MYT order for the generation business on 8th August2016 for the transmission business on 30th June 2016 and for the distribution business on21st October 2016. In FY18 review petitions as relevant against these orders have beenfiled at the appropriate forums.

8.2.2. NETWoRK RoLL-ouT PLAN

The Petition has been disposed of by MERC on 12th June 2017 providinginter alia criteria and various possible scenarios for providing consumer connectionsestablishing an institutional mechanism for evaluating and deciding on applications fornew connections forwarded by the Distribution Licensees as also prescribing the protocolfor releasing connections to new consumers etc. The said order has been challenged beforeAPTEL by your Company as well as by other Mumbai Discoms and a consumer body. The finalhearing on these appeals has been completed and orders are reserved.

8.2.3. TPC-D's RIGHT To LAY NETWoRK AND ACQuiRE

customers

MERC in its order in the case filed by BEST ruled in favour of TataPower Company-Distribution (TPC-D) that it can lay its distribution network in line withthe APTELJudgement in Appeal No. 246 of 2012 and also in line with MERC's interim orderdated 9th November 2015 in case no. 182 of 2014.

MERC in its order dated 24th January 2018 rejected the claim ofRInfra-D against TPC-D contravening the decision and the directions of the Commissionissued in the interim order dated 9th November 2015 in Case No. 182 of 2014 relating toTPC-D's right to acquire new or switchover consumers by laying its own network in terms ofthe APTEL judgement and MERC's interim order .

8.2.4. DisTRiBuTioN LiCENsEs - APPEAL FiLED BY R-iNFRA AND BEsT

The appeal filed by R-Infra challenging the distribution licensegranted to TPC-D in August 2014 is pending before APTEL. Further appeals filed by R-Infraand BEST against the interim order dated 9th November 2016 passed by MERC are alsopending before APTEL. Proceedings in the matter are completed and the order is reserved.

8.2.5. sTANDBY CHARGEs

On an appeal filed by your Company the Supreme Court had stayed theoperation of the APTEL order in 2007 subject to the condition that your Company depositsan amount of ? 227 crore and submits a bank guarantee for an equal amount. Your Companyhas complied with both the conditions. R-Infra has also subsequently filed an appealbefore the Supreme Court challenging the APTEL order. Both the appeals were admitted in2007. The matter was part heard during this year and the hearings are yet to be completed.

8.2.6. ENERGY CHARGEs AND 'TAKE oR PAY' oBLiGATioN

In a case relating to Take or Pay obligation payable to the Companythe Supreme Court vide its order dated 14th December 2009 has granted a stay against theAPTEL order and has directed R-Infra to deposit with the Supreme Court a sum of ? 25 croreand furnish a bank guarantee for the balance amount. No hearings were held during the yearon this matter.

8.2.7. ENTRY TAX

Your Company had filed a writ in the Bombay High Court (HC) challengingthe constitutional validity of the Maharashtra Entry Tax Act 2002. HC dismissed the writpetition. Aggrieved your Company filed Special Leave Petitions (SLP) in the SupremeCourt. Vide its order dated 21st October 2016 the Supreme Court passed the order stayingthe demand of entry tax by extending the interim stay earlier granted by the High Court.Your Company has filed a writ petition in the Supreme Court on which the Supreme Courtissued a notice and tagged it along with the Company's SLP. The matter is now awaited forlisting for final hearing and disposal.

8.2.8. EXTENSION OF PPA BETWEEN TPC-G AND BEST

BEST and Tata Power Company-Generation (TPC-G) had entered into a PPAdated 21st December 2006 for bulk supply of power. The said agreement was extended fromtime to time by the parties with due approval of MERC. The term of the existing PPAexpired on 31st March 2018.

BEST undertook a competitive bidding process for procurement of 750 MWpower for 5 years starting 1st April 2018. However after completion of the biddingprocess BEST filed a petition before MERC seeking cancellation of the bidding processundertaken approval of timelines for undertaking a fresh competitive bidding process for5 years starting from 1st April 2019 and the extension of the existing PPA between BESTand TPC-G in terms of Clause 3.3 of the existing PPA.

MERC vide its order dated 27th February 2018 has approved extensionof the validity of the PPA between BEST and TPC-G for 676 MW of power (excluding Unit 6)along with certain other directions to be incorporated in the existing PPA as extended upto 31st March 2019.

8.2.9. EXTENSION OF PPA BETWEEN TPC-G AND TPC-D

TPC-D and TPC-G had entered into PPA dated 23rd December 2006 for bulksupply of power. The said agreement was extended from time to time by the parties with dueapproval of MERC. The term of the existing PPA was to expire on 31st March 2018.

MERC vide its order dated 27th March 2018 approved the extension ofPower Purchase Arrangement between TPC-G and TPC-D for one year from 1st April 2018 to31st March 2019 for a total capacity of 672 MW.

8.3. JOJOBERA OPERATIONS

8.3.1. MYT Order For JOJOBERA uNIT 2 And uNIT 3 INcluDING TRuE-up FORFY 2015-16

On 19th February 2018 JSERC has passed the MYT Order for Jojobera Unit2 and Unit 3 for the control period FY17- 21 together with true-up for FY16.

With respect to the tariff order for the control period FY17-21 areview has been sought from JSERC on a deviation taken on an operating norm. With respectto truing-up for FY16 your Company has taken up review of some claims which have beendisallowed before JSERC and appealed at APTEL.

8.4. maithon power limited (mpl)

8.4.1. REVIEW/AppEAL FILED AGAINsT DisALLOWANcEs BY cERc FOR TRuiNG-upOF TARIFF FOR FY12-14 AND DETERMINATION OF TARIFF FOR FY15-19

MPL had filed a petition for determination of tariff for the periodFY15-19 along with the truing-up for FY12-14 on 1st June 2015 before CERC. Theproceedings in the abovematter had been completed in December 2016 and the order wasissued on 26th December 2017. MPL filed a review petition before CERC and appeal beforeAPTEL against the disallowances in the tariff order dated 26th December 2017.

8.4.2. petition sEEKING IN-pRINcipLE AppROVAL FOR capex schemes FORMEETING NEW ENVIRONMENT NORMs

MPL has approached CEA and MoEF&CC as per directions of CERC todecide the optimum technology and associated costs for phasing of implementation ofdifferent environment measures in compliance with new environmental norms. It will thenapproach CERC based on the approval of CEA and direction of MoEF&CC.

8.5. pOWERLINKs TRANsMissiON LIMITED (pTL)

8.5.1. TRuiNG-up FOR FY10-FY14 AND MuLTI YEAR TARIFF FOR FY14-19

Subsequent to the true-up order for FY10-14 CERC directed its staff toexamine the impact of Transmission Majoration Factor (TMF) to review the continuation ofTMF for subsequent years.

CERC thereafter notified a draft amendment to CERC TariffRegulations 2014 abolishing the continuation of TMF for PTL. Powerlinks objecting tosuch amendment has filed detailed comments and presented the same before CERC during thepublic hearing held for the issue. CERC has not issued the final regulations in thisregard yet.

9. risks and concerns

Your Company is faced with risks of different types all of which needdifferent approaches for mitigation. Details of various risks faced by the Company areprovided in section 4 of MD&A of this Annual Report.

10. risk MANAGEMENT FRAMEWORK AND INTERNAL financial controls

Risk Management Framework:

Based on the Risk Management . .

Policy (https-J/www.tatapower .management-policy.pdf)(alternately scan the adjacent QR Code using a mobile device toread the policy on the Company website) a standardized Risk Management Process and Systemhas been implemented across the Tata Power group. Risk plans have been framed for allidentified risks and uploaded in the system with mitigation action target dates andresponsibility. The Risk Register contains the mitigation plans. Functional RiskManagement Committees (FRMCs) closely monitor and review the risk plans.

The Apex Risk Management Committee (ARMC) meets every quarter to reviewkey strategic and tactical risks identify new risks and assess the status of mitigationmeasures. As per the Listing Regulations a Risk Management Committee (RMC) wasconstituted which currently comprises of three Independent Directors one Non-ExecutiveDirector and one Executive Director. The RMC meets regularly to review critical strategicrisks.

In FY16 and FY17 the British Standards Institution (BSI) did anassessment of Tata Power and its eight major subsidiaries and conferred the 'Statement ofCompliance' for Tata Power Group for ISO 31000:2009. Tata Power was the first powercompany in India to get this recognition in FY15. This year Tata Power Group's externalISO assessment is scheduled for July 2018.

Tata Power bagged two prestigious awards at the CRO Leadership Summitand awards conducted by UBS Transformance in November 2017. The Company won the 'RiskManagement Team of the Year 2017' and Tata Power's Chief Risk Officer Mr. ParshuramDate was awarded 'CRO of the Year 2017' in the power sector. In January 2018 Tata Powerwas pronounced as the joint winner in the category - 'Best Risk Management Framework &Systems - Power' at the 4th Edition of CNBC-TV18 The India Risk Management Awards. Alsothis year Tata Power has obtained a copyright for its web- based Risk Management System.

internal Financial Controls and Systems:

The Company has its internal audit function reviews and ensuressustained effectiveness of Internal Financial Controls (IFC) by adopting a systematicapproach to its work.

To fulfil the requirements of the Companies Act 2013 the in-houseinternal audit team integrated IFC controls into risk control matrix (RCMs) of enterpriseprocesses in FY17. 100% testing of IFC controls was ensured during process audit orcreating separate audit areas of IFC testing where process audits were not due.

On review of the internal audit observations and action taken on auditobservations we can state that there are no adverse observations having material impacton financials commercial implications or material noncompliances which have not beenacted upon.

The Company continued the Control Self-Assessment (CSA) process whichincluded seven Tata Power group companies this year whereby responses of all processowners are used to assess internal controls in each process. This helps the Company toidentify focus audit areas design the audit plan and support CEO/CFO certifications forinternal controls.

11. SAFETY

Safety is a core value of the Company. The Company has adopted astructured approach towards implementation of Safety Policies and Programs to integratesafety with critical business processes with a goal to continuously improve safetyperformance. Safety organisation has been established for developing and implementingSafety Management Systems and to facilitate a change in culture through leadershipinterventions to mitigate risks.

Safety Statistics FY18: (Table 7)

Safety Parameters in your Company's work jurisdiction (Tata power cgpL MpL lei CTTL pTL TpDDL and TpSSL) FY18 FY17
1 Fatality (Number) 1 2
2 LTIFR (Lost Time Injuries Frequency Rate per million man hours) 0.17 0.23
3 Total Injury Frequency Rate (No of injuries per million man hours) 2.26 4.32
4 First Aid Cases (Number) 105 232

Your Company is deeply aggrieved by the fatality and accidents. Ittreats any fatality in any of its premises of any of its employees contractor/associateemployees or any third party with equal gravitas and is committed to taking the entireworking environment and behaviour to the highest safety standards.

Your Company has increased its efforts on safety during the year andhas adopted the following safety interventions in FY18 to improve safety in theorganisation:

• Collaborative Leadership Coaching Program was conducted foridentified leaders.

• Safety Code of Conduct (SCoC) was framed and signed off by allemployees.

• Integrated safety Key Responsibility Area (KRA) was included inPerformance Management System (PMS).

• Enhanced capability building through competency-based trainingprograms at Tata Power Skill Development Institute (TPSDI).

• Implemented the contractors' safety code of conduct to improvecapability and capacity of contractors and evaluated their safety performance for all thestages of contract (registration bidding and execution).

• Stakeholder 'Suraksha' application developed for empowering thebusiness associates to report incidents/observations.

12. SUSTAINABILITY

Your Company successfully completed over 100 years of operations andremains committed to the legacy of being a responsible corporate citizen. It has practisedsustainability over these 100 years and thus reinforced the core value of Leadership withCare. For your Company sustainability is care for the environment care for the customersand shareholders care for the community and care for our people.

The Company's efforts on sustainability were recognized at variousplatforms and a testimony to this was the various awards bestowed upon your Company. TheCompany has received the domain excellence award in biodiversity conservation at the CIIITC Sustainability Awards 2017. Your Company was also ranked 3rd in the ResponsibleBusiness Ranking for Sustainability and CSR released in September 2017.

Fig 1 - Tata Pow

12.1. CARE FOR OUR COMMUNITY/COMMUNITY RELATIONS

Your Company has actively worked on the key focus areas in CorporateSocial Responsibility (CSR) covering education health & sanitation water livelihoodand employability social capital and financial inclusivity as well as rural energy whilefocusing on Affirmative Action (AA) initiatives of the Tata Group.

Your Company has a unique governance system for Sustainability as astrategic theme. This is guided by the Sustainability Advisory Council (SAC) comprisingeminent experts from various fields impacting sustainability.

Tata Power's CSR initiatives were extended to the geographies where thenew solar and wind plants are located.

Your Company's standalone CSR spend for FY18 stood at ? 14.71 croreagainst the Companies Act 2013 requirement of ? 13.71 crore. Additionally as a part ofdisaster relief operations the Company contributed towards relief efforts in Gujarat.

Independent monitoring effectiveness of implementation and impactassessment were undertaken to provide feedback and to refine realign the programs so thatthe extent and effectiveness of the initiatives could be improved in pursuance of theCompany's objective to improve the quality of life of the community and to get thecommunity's tacit or implied acceptance of the Company's co-existence with them.

Details of the CSR activities of your Company and its key subsidiariesare listed in the MD&A section of this annual report.

The annual report on CSR activities is provided in Annexure-II.

12.2. AFFIRMATIVE ACTION

Under its Affirmative Action (AA) program your Company has implementedseveral initiatives for Employment Entrepreneurship Employability Education andEssential Amenities for the communities around its operating sites.

The major programs carried out in the neighbourhood of the operatingplants and projects are Skill Development

Programs (through TPSDI Industrial Training Institutes and VocationalTrainings) entrepreneurships programs like Maval dairy sustainable agriculture andsupporting Self Help Groups (SHG) and support for educational initiatives like elearning educational aid and learning camps.

The Company continued its work in areas beyond its areas of operationssuch as in Jawahar taluka Palghar district of Maharashtra which has a tribal populationwhich constitutes over 90% of the total population with a vast majority being below thepoverty line. The activities here include initiatives like generating livelihoodopportunities to improve sub-economic status integrated watershed management programcapacity building through a participatory approach women's empowerment through SHGs and aVillage Development Council (VDC) for sustainable development. The VDC has elected membersfrom the village as well as a Tata Power representative and is responsible for thesustainable development of the village.

12.3. CARE FOR OUR ENViRONMENT

The Company during the year under review addressed various aspects ofresource conservation energy efficiency carbon footprint renewable power generationbiodiversity and green buildings. Details of initiatives undertaken are given in MD&ASection 8.1.3.

12.4. CLUB ENERJi

Tata Power's Club Enerji is focused on school students to champion thenoble cause of conservation of resources and enhance moral and civic values. The Club hasbeen ceaselessly working towards creating responsible citizens of tomorrow who focus notonly on conserving energy and natural resources (like fossil fuel - coal oil gas water;managing waste; afforestation) but also conserve civic ethical and moral values insociety at large.

Recognizing the immense value that schools and school children canbring to the initiative and taking due consideration of the social need Tata Powerstarted 'Tata Power Club Enerji' in 2007 to propagate efficient usage of energy and toeducate the society on climate change issues. The program is now in its 10th year and hascovered more than 500 schools across Mumbai Delhi Pune Ahmedabad Bengaluru KolkataBelgaum Jamshedpur Lonavala and five more cities. It has reached out to more than 1.93crore citizens collectively saved 25 million units of electricity - equivalent to saving25000 tons of CO2. All over India 200 Mini Clubs have also been formed under the ClubEnerji initiative.

Tata Power Club Enerji also launched its comprehensive online module inNovember 2015 with an aim to reach out to a larger audience with a vision oftransformation and adoption of a holistic and robust approach towards conservation. Themodule since its launch has also reached out to audiences in new internationalgeographies like Philippines UAE USA UK and South Africa and newer national geographieslike Chandigarh Hyderabad and Chennai.

12.5. DEMAND SiDE MANAGEMENT

The Company has been a pioneer in propagating energy conservation andefficiency. Demand-side management (DSM) refers to cooperative activities between theutility and its customers to implement options for increasing the efficiency of energyutilization with resulting benefits to the customer utility and the society.

12.6. SUSTAiNABiLiTY REpoRTING

Your Company has adopted the latest Global Reporting Initiative (GRI)Standards for its combined Sustainability Report for FY16-18 which is currently underpreparation to report on its sustainability performance specific to the Indian operationsof your Company viz. generation transmission and distribution. The Company'sSustainability Reports can be accessed using the following link: https://www.tatapower .com/sustainability/communication.aspx (alternately scan the adjacent QR code using amobile device to read the policy on the Company website)

12.7. business responsibility report (BRR)

The Business Responsibility Reporting is in line with the SEBIrequirement based on the 'National Voluntary Guidelines on Social Environmental andEconomic Responsibilities of Business' notified by Ministry of Corporate Affairs (MCA)Government of India in July 2011. Your Company reported its performance for FY18 as perthe BRR framework describing initiatives taken from an environmental social andgovernance perspective.

13. directors and key managerial personnel

change in Board composition

Pursuant to the Guidelines adopted by the Company for retirement ofNon-Executive Directors Dr. Homiar S. Vachha Independent Director on your Company'sBoard ceased to be Director of the Company effective 23rd April 2017 consequent upon hiscompleting 75 years of age. The Board of Directors place on record their deep appreciationfor the contribution made by Dr. Vachha during his tenure.

On the recommendation of the Nomination and Remuneration Committee(NRC) Mr. K. M. Chandrasekhar was appointed as an Additional Director of the Company witheffect from 4th May 2017 by the Board of Directors

in accordance with Section 161(1) of the Act and Article 132 of theCompany's Articles of Association. Mr. Chandrasekhar was also appointed as an IndependentDirector for a period of 5 years with effect from 4th May 2017 upto 3rd May 2022. Hisappointment as Independent Director was approved at the previous Annual General Meeting(AGM) by the Members.

Mr. Pravin H. Kutumbe nominee of Life Insurance Corporation of India(LIC) on the Company's Board resigned as a Director of your Company effective 20th May2017. The Board has placed on record its appreciation of the valuable contribution made tothe Company by Mr. Kutumbe during his tenure. Mr. Hemant Bhargava Managing Director ofLIC was then nominated by LIC as Director on the Board. Mr. Bhargava was appointed as anAdditional Director of the Company with effect from 24th August 2017 by the Board ofDirectors on the recommendation of the NRC in accordance with Section 161(1) of the Actand Article 132 of the Company's Articles of Association. Mr. Bhargava holds office onlyupto the date of the forthcoming AGM and a notice under Section 160(1) of the Act has beenreceived from a Member signifying its intention to propose his appointment as a Director.

Mr. S. Padmanabhan and Ms. Sandhya S. Kudtarkar NonExecutive Directorson your Company's Board resigned from the Board on 16th November 2017. The Board hasplaced on record its appreciation of the valuable contribution made to the Company by Mr.Padmanabhan and Ms. Kudtarkar during their respective tenures.

Mr. Saurabh Agrawal and Mr. Banmali Agrawala were appointed asAdditional Directors of the Company with effect from 17th November 2017 by the Board ofDirectors on the recommendation of the NRC in accordance with Section 161(1) of the Actand Article 132 of the Company's Articles of Association. Mr. Agrawal and Mr. Agrawalahold office only upto the date of the forthcoming AGM and a notice under Section 160(1) ofthe Act has been received from a Member signifying its intention to propose theirappointment as Directors.

Mr. Anil Sardana resigned as CEO & Managing Director of the Companyeffective close of business hours on 30th April 2018. The Board has placed on record itsdeep sense of appreciation of the valuable contribution made by Mr. Sardana to theoperations and growth of the Company during his tenure.

On the recommendation of the NRC Mr. Praveer Sinha was appointed asAdditional Director of the Company with effect from 1st May 2018 by the Board ofDirectors in accordance with Section 161(1) of the Act and Article 132 of the Company'sArticles of Association. Mr. Sinha holds office only upto the date of the forthcoming AGMand a notice under Section 160(1) of the Act has been received from a Member signifyinghis intention to propose Mr. Sinha's appointment as Director. Mr. Sinha was also appointedas CEO & Managing Director of the Company for the period of 5 years commencing from1st May 2018 to 30th April 2023. His appointment and the terms and conditions of hisappointment including remuneration payable to him require approval of the Members at theensuing AGM.

In accordance with the requirements of the Act and the Company'sArticles of Association Mr. N. Chandrasekaran retires by rotation and is eligible forre-appointment. Members' approval is being sought at the ensuing AGM for hisre-appointment.

Number of Board Meetings

Nine Board Meetings were held during the year. For further detailsplease refer to Report on Corporate Governance which forms a part of this Annual Report.independent Directors

In terms of Section 149 of the Act Mr. N. H. Mirza Mr. D. M.Satwalekar Ms. Anjali Bansal Ms. Vibha Padalkar Mr. S. V. Bhandarkar and Mr. K. M.Chandrasekhar are the Independent Directors of the Company. The Company has receiveddeclarations from all the Independent Directors confirming that they meet the criteria ofindependence as prescribed under the Act.

Key Managerial Personnel

In terms of Section 203 of the Act the following are the KeyManagerial Personnel (KMP) of the Company:

• Mr. Praveer Sinha CEO and Managing Director

• Mr. Ashok S. Sethi COO and Executive Director

• Mr. Ramesh N. Subramanyam Chief Financial Officer

• Mr. Hanoz M. Mistry Company Secretary

14. ANNUAL evaluation OF BOARD PERFORMANCE AND performance of itscommfttees And individual directors

The Board of Directors has carried out an annual evaluation of its ownperformance performance of the Directors individually as well as the evaluation of theworking of its Committees pursuant to the provisions of the Act Regulation 25 of theListing Regulations and the Guidance Note on Board Evaluation issued by SEBI on 5thJanuary 2017.

The following process was adopted for Board evaluation:

i) Feedback was sought from each Director about their views on theperformance of the Board covering various criteria such as degree of fulfilment of keyresponsibilities Board structure and composition establishment and delineation ofresponsibilities to various Committees effectiveness of Board processes information andfunctioning Board culture and dynamics quality of relationship between the Board and theManagement and efficacy of communication with external stakeholders. Feedback was alsotaken from every Director on his assessment of the performance of each of the otherDirectors.

ii) The Nomination and Remuneration Committee (NRC) then discussed theabove feedback received from all the Directors.

iii) Based on the inputs received the Chairman of the NRC alsoapprised the Independent Directors at their meeting summarising the inputs received fromthe Directors as regards Board performance as a whole and of the Chairman. The performanceof the Non-Independent Non-Executive Directors and Board Chairman was also reviewed bythem.

iv) Post the meeting of the Independent Directors their collectivefeedback on the performance of the Board (as a whole) was discussed by the Chairman of theNRC with the Chairman of the Board. It was also presented to the Board and a plan forimprovement was agreed upon and is being pursued.

v) Every statutorily mandated Committee of the Board conducted aself-assessment of its performance and these assessments were presented to the Board forconsideration. Areas on which the Committees of the Board were assessed included degree offulfilment of key responsibilities adequacy of Committee composition and effectiveness ofmeetings.

vi) Feedback was provided to the Directors as appropriate. Significanthighlights learning and action points arising out of the evaluation were presented to theBoard and action plans drawn up. During the year under report the recommendations made inthe previous year were satisfactorily implemented.

15. REMUNERATION POLICY FOR THE DIRECTORS KEY MANAGERIAL pERsoNNEL AndoTHER Employees

In terms of the provisions of Section 178(3) of the Act and Regulation19 read with Part D of Schedule II to the Listing Regulations the NRC is responsible forformulating the criteria for determining qualification positive attributes andindependence of a Director. The NRC is also responsible for recommending to the Board apolicy relating to the remuneration of the Directors Key Managerial Personnel and otheremployees. In line with this requirement the Board has adopted the Policy on BoardDiversity and Director Attributes which is provided in Annexure-III to this Report andRemuneration Policy for Directors Key Managerial Personnel and other employees of theCompany which is reproduced in Annexure-IV to this Report.

16. committees of the board

The Committees of the Board focus on certain specific areas and makeinformed decisions in line with the delegated authority.

The following statutory Committees constituted by the Board functionaccording to their respective roles and defined scope:

• Audit Committee of Directors

• Nomination and Remuneration Committee

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

• Risk Management Committee

Details of composition terms of reference and number of meetings heldfor respective committees are given in the Report on Corporate Governance which forms apart of this Report.

The Board has laid down separate

Codes of Conduct for Non- Ill

Executive Directors and Senior Management personnel of the Company andthe same can be

accessed using the following link: h ttps://www.tatapower.com/pdf/aboutus/Code-of-Conduct-NEDs.

. (alternately scan the adjacent QR Code using a mobiledevice to readthe policy on the Company website). All SeniorManagement personnel have affirmedcompliance withthe Tata Code of Conduct (TCOC). The CEO & ManagingDirector has alsoconfirmed and certified the same. Thecertification is enclosed at the end of the Report on

Corporate Governance.

17. conservation of energy and technology ABsoRpTIoN

The information on conservation of energy and technology absorptionstipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies(Accounts) Rules 2014 is attached as Annexure - V to this Report.

18. particulars of employees and remuneration

The information required under Section 197(12) of the Act read withRule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is attached as Annexure - VI.

The information required under Rule 5(2) and (3) of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided in theAnnexure forming part of this Report. In terms of the first provision to Section 136 ofthe Act the Report and Accounts are being sent to the Members excluding the aforesaidAnnexure. Any member interested in obtaining the same may write to the Company Secretaryat the Registered Office of the Company. None of the employees listed in the said Annexureare related to any Director of the Company.

Officers of the organisation are classified into five management worklevels i.e. MA MB MC MD and ME. The work levels are further divided into grades.Nonmanagement employees are across different grades and also have been classified asunskilled semi-skilled skilled and highly skilled.

For the officers Uniform Compensation Structuring (UCS) exercise wasundertaken in FY18 to promote talent mobility in the organisation. This will help inensuring seamless mobility of talent with minimal or no change in CTC across the TataPower Group. UCS provided an integrated aligned and uniform view of talent acrossentities leading to more avenues for growth to available talent across entities. Theentire implementation process was done in-house by the HR team in the defined time span.

19. RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the Listing Regulationsthe [3Company has formulated a Policy I]*j"on Related Party Transactions andthe samecan be accessed using thefollowing link:https://www.tatapower.com/pdf/ aboutus/rpt-policy-framework- guidelines.pdf (alternately scan the adjacent QR code usinga mobile device to read the policy on the Company website). Details of Related PartyTransactions as per AOC-2 are provided in Annexure-VII to this Report.

20. DEPOSITS (Table 8)

 

.Sl' particulars No. Amount in 7
1. Accepted during the year Nil
2. Remained unpaid or unclaimed at the end of the year* 258105
3. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so number of such cases and the total amount involved NA
 

• At the beginning of the year

 

• Maximum during the year

 

• At the end of the year

4. Details of deposits which are not in compliance with the requirements of Chapter V of the Act NA

*This relates to deposits accepted under the Companies Act 1956.

21. LOANS GUARANTEES SECURITIES AND INVESTMENTS

The Company being an infrastructure company is exempt from theprovisions as applicable to loans guarantees and securities under Section 186 of the Act.The details of investments are provided in the notes to the financial statements.

22. extract of annual return

Pursuant to Section 92 of the Act and Rule 12 of The Companies(Management and Administration) Rules 2014 the extract of Annual Return in Form MGT-9 isprovided in Annexure-VIII to this Report.

23. AuDIToRS

M/s S R B C & CO. LLP (SRBC) who is the statutory auditor of yourCompany holds office until the conclusion of the hundred and third AGM to be held in theyear 2022 subject to ratification of its appointment at every AGM if required under law.

Members will also be requested to pass a resolution (vide Item No.12 ofthe Notice) authorizing the Board of Directors to appoint Branch Auditors for the purposeof auditing the accounts maintained at the Branch Offices of the Company abroad.

24. AuDIToRS' REpoRT

The standalone and the consolidated financial statements of the Companyhave been prepared in accordance with Indian Accounting Standards (IndAS) notified undersection 133 of the Companies Act 2013.

25. cost auditor and cost audit report

M/s Sanjay Gupta and Associates Cost Accountants were appointed CostAuditors of your Company for FY18.

In accordance with the requirement of the Central Government andpursuant to Section 148 of the Act your Company carries out an annual audit of costaccounts relating to electricity. The Cost Audit Report and the Compliance Report of yourCompany for FY17 was filed on 8th September 2017 with the Ministry of Corporate Affairsthrough Extensive Business Reporting Language (XBRL) by M/s Sanjay Gupta and AssociatesCost Accountants before the due date of 30th September 2017.

26. secretarial audit report

M/s. Parikh & Associates Company Secretaries were appointed asSecretarial Auditors of your Company to conduct a Secretarial Audit of records anddocuments of the Company for FY18. The Secretarial Audit Report confirms that the Companyhas complied with the provisions of the Act Rules Regulations and Guidelines and thatthere were no deviations or non-compliances.

The Secretarial Audit Report does not contain any qualificationsreservations or adverse remarks or disclaimers. The Secretarial Audit Report is providedin Annexure-IX.

The Company confirms compliance with the requirements of SecretarialStandards 1 and 2.

27. CORPORATE GOVERNANCE

Pursuant to Regulation 34 of the Listing Regulations and relevantsections of the Act a Management Discussion and Analysis Statement Report on CorporateGovernance and Auditors' Certificate thereon are included in the Annual Report.

28. ViGiL MECHANiSM

Your Company believes in the conduct of the affairs of its constituentsin a fair and transparent manner by adopting the highest standards of professionalismhonesty integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC)any actual or potential violation howsoever insignificant or perceived as such would bea matter of serious concern for the Company. The role of the employees in pointing outsuch violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act a vigil mechanism wasestablished for directors and employees to report to the management instances of unethicalbehaviour actual or suspected fraud or violation of the Company's code of conduct orethics policy. The Vigil Mechanism provides a mechanism for employees of the Company toapproach the Chief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Companyfor redressal.

29. DiRECTORS' RESPONSiBiLiTY STATEMENT

Based on the framework of internal financial controls and compliancesystems established and maintained by the Company work performed by the internalstatutory cost auditors secretarial auditors and external consultants including audit ofIFC for financial reporting by the statutory auditors and the reviews performed bymanagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's IFC were adequate and effective during FY18.

Accordingly pursuant to Section 134(5) of the Act the Board ofDirectors to the best of its knowledge and ability confirm that:

a) in the preparation of the annual accounts the applicable accountingstandards had been followed and there are no material departures;

b) the Directors had selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of

the financial year and of the profit of the Company for that period;

c) the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a going concernbasis;

e) the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively (refer section 10);

f) the Directors had devised proper systems to ensure compliance withthe provision of all applicable laws and that such systems were adequate and operatingeffectively.

30. acknowledgements

On behalf of the Directors of the Company I would like to place onrecord our deep appreciation to our shareholders customers business partners vendors -both international and domestic bankers financial institutions and academic institutionsfor all the support rendered during the year.

The Directors are thankful to the Government of India the variousministries of the state governments the central and state electricity regulatoryauthorities communities in the neighbourhood of our operations municipal authorities ofMumbai and local authorities in areas where we are operational in India; as alsopartners governments and stakeholders in international geographies where the Companyoperates for all the support rendered during the year.

Finally we appreciate and value the contributions made by all ouremployees and their families for making the Company what it is.

On behalf of the Board of Directors

N. Chandrasekaran

Chairman

(DIN: 00121863)

Mumbai 2nd May 2018