28 Sep 2012 07:00
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN
28 September 2012 |
Mytrah Energy Limited
("Mytrah Energy" or the "Company")
Final Results for year end 31 March 2012
The Board of Directors of Mytrah Energy Limited (the "Board") is pleased to announce the Company's annual financial results for the year ended 31 March 2012. The 2012 Audited Annual Report and Accounts will be posted to shareholders today and is available on the Company's website www.mytrah.com. The Company further announces that the Annual General Meeting will be held at 12 noon on 8 November 2012 at Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 1EJ, Channel Islands.
Highlights:
·; Revenue of USD 6.97m for the year ended 31 March 2012 (2011: USD nil);
·; Earnings before interest, taxes, depreciation and amortisation (EBITDA) of USD 3.78m for the year ended 31 March 2012 (2011: USD (1.15m));
·; Loss after tax of USD 2.83m for the year ended 31 March 2012 (2011: USD 1.58m);
·; Profitable at the Indian operating company level;
·; USD 156.69m of debt financing secured from Infrastructure Development Finance Company ("IDFC") and Indian Renewable Energy Development Agency ("IREDA") as at 31 March 2012 (2011: USD 100.00m) which includes USD 115.71m of mezzanine financing secured from Indian Infrastructure Fund, IDFC and PTC Financial services ("PTC") as at 31 March 2012 (2011: USD nil);
·; 316 megawatt ("MW") (186 MW during the year) of fully operational capacity with a further 24 MW scheduled to be delivered in Q3 of 2012-13;
·; Signed an memorandum of understanding ("MoU") with the Government of Andhra Pradesh to develop 2,850 MW of capacity over the next seven years;
·; Signed an MoU with the Government of Karnataka for 1,627 MW of capacity;
·; Licences, access, allotments or concessions secured for areas suitable for over 5,000 MW of self-developed projects;
·; Strengthening of the management team; and
·; The dollar strengthening has a minimal cash and economic impact on the Company as all of its contracts are in Indian rupees.
Post Year End
·; Installed capacity increased to 316 MW across seven projects in four States;
·; Additional senior debt of USD 109.99m secured with L & T Infra, IREDA and State Bank of Patiala;
·; Draw down on non-dilutive mezzanine funding of USD 18.15m from PTC;
·; Projects performing ahead of forecast plant load factors ("PLF"); and
·; Proposed restructuring of the Board
Ravi Kailas, Mytrah Energy's Chairman and Chief Executive Officer, commented:
Over the last 12 months, Mytrah has rapidly evolved into an independent power producer ("IPP") with a portfolio of operating wind farm projects across India. In a short time span and from a standing start, we believe we have become one of the top two largest wind IPPs in India during 2012. We have reached this milestone by establishing strong relationships with leading wind turbine manufacturers, securing mezzanine funding with no equity dilution, securing senior debt from a wide spectrum of leading Indian lenders, building one of the best and most comprehensive execution teams in this space, securing allotments and concessions for an estimated 5000 MW wind development portfolio across various states, and completing 316.2 MW of wind projects, 186 MW during the year ended March 2012 and 130.2 MW post year end.
The Group and its subsidiaries have secured non-dilutive funding totalling USD 115.71m from India Infrastructure Fund, IDFC and PTC during the year. We are the first IPP in the wind sector to secure this scale and type of funding, which we believe is testament to our project development strategy and team.
In addition, we announced in December 2011 that our 100% owned subsidiary, Bindu Vayu Urja Private Limited had secured new senior loan funding totalling USD 185.18m. This comprised USD 115.71m which is fully underwritten by IDFC, and USD 69.47m which has now completed syndication. The Group believes that this is the largest single senior debt placement for a wind power focused renewable IPP in India.
Furthermore, post year-end, our 100% owned subsidiary, Mytrah Vayu (Pennar) Private Limited has secured senior debt totalling USD 71.55m. This takes our total senior loan funding to USD 256.55m. All senior debt has been secured at rates that the Board considers competitive and is for a tenure of 14 years.
Albeit with a slight delay, we currently have a well-diversified portfolio of 316.2 MW of fully operational assets across seven projects in four states and 24 MW under advanced stages of construction to be delivered in Q3 of 2012-13. The underlying assets have a very strong cash flow profile with long-term Power Purchase Agreements ("PPAs") and generate predictable and long-term cash flows providing attractive returns for our shareholders. These projects have, so far performed above our initial estimated PLF validating the assessments made by the company.
In an environment where identifying and executing projects with attractive returns is becoming an increasingly difficult task, our team has done a fabulous job of identifying a further 270 MW of projects that meet and pass our stringent criteria in terms of risks of project execution, project cost and above normal returns. These projects are under advanced stages of development where construction is expected to begin in October/November 2012 and are targeted to be commissioned and generating power in stages by the first half of 2013. I am happy to report that 340.2 MW is by far the single largest addition of assets in such a period by any wind IPP in India and we expect to reach a cumulative total of approximately 600 MW of operational wind capacity by the end of the first half of 2013, at which point Mytrah should be established as the largest independent wind IPP in India.
The cost of wind power in India has almost reached 'Grid Parity' with traditional thermal power generation in almost all the states that we operate in. This is particularly evident in Mytrah's case as the capital cost of our assets is estimated to be the lowest in the industry. The recent auctions for new coal fired generation in the states of Karnataka and Andhra Pradesh and the tariff announcements by CERC for commissioned projects revealed prices that are higher than what the states offer for wind power. This creates a fundamental business proposition for Mytrah and its business and de-risks the business from any adverse regulatory changes. Furthermore, the growing energy demand without equivalent growth in supply produces a constant upward thrust on power prices and given the fuel supply, permitting and environmental issues associated with the conventional sector, the power outages continue to be rampant throughout the nation and the industries and commercial establishments continue to incur about Rs. 16-20 /KwH to generate power through diesel generators, further re-enforcing the strength of our business.
Overall, this has been a transformational year for the Company and we have laid a strong foundation for long term profitable and sustainable growth. In a short span of time, we have built, what I believe is a unique, vibrant and exciting organisation capable of being an industry leader and drive change in the industry. I believe that Mytrah's continued access to financing, its access to a deep and wide development portfolio, strong partnerships with equipment vendors, differentiated strategy, favourable industry dynamics and experienced management team will enable the Group to maintain its rapid growth and deliver a highly accretive and profitable portfolio of superior asset returns to its investors.
Further information on the Company can be found at www.mytrah.com.
- Ends -
For further information please contact:
Mytrah Energy Limited | |
Ravi Kailas, Chairman and Chief Executive Officer | +91 40 33760100 |
Strand Hanson Limited | |
Angela Peace / Paul Cocker / James Harris | +44 (0) 20 7409 3494 |
Deutsche Bank | |
Drew Price/RajatKatyal | +44 (0) 20 7547 8000 |
Mirabaud Securities LLP | |
Peter Krens / Rory Scott | +44 (0) 20 7878 3360 |
St Brides Media & Finance Limited | |
Elisabeth Cowell/Frank Buhagiar | +44 (0) 20 7236 1177 |
Chairman and CEO's Statement
It is a pleasure to present Mytrah's preliminary audited financial results for the year ended 31 March 2012, our first operating year as a public company. The Group began recognising revenue for the first time in the current financial year, with wind farms in Gujarat, Rajasthan and Maharashtra states becoming operational. I am happy to inform that these projects have, so far, performed above our initial estimated PLFs validating the assessments made by the Group. The Group currently has 316 MW (186 MW during the year ended 31 March 2012) of fully operational capacity with a further 24 MW scheduled to be delivered in Q3 of 2013. The Group reported an EBITDA of USD 3.78m for the year ended 31 March 2012 (2011: USD (1.15m)) and considers EBITDA to be a key performance indicator.
Financial review
For the year ended 31 March 2012, the Group's revenue was USD 6.97m (2011: USD nil) and loss after tax of USD 2.83m (2011: USD 1.57m). Due to the 14.5% fall in the exchange rate between the Indian Rupee and US dollar, there was an exchange loss on translating foreign operations of USD 12.02m (2011: USD 0.93m) included within total comprehensive loss for the year of USD 14.82m (2011: USD 2.50m). This is a translation reserve and has no cash or operational impact and is purely a conversion item. The tax credit for the year ended 31 March 2012 is USD 1.37m (2011: USD 0.38m charge) which is primarily due to a deferred tax credit of USD 1.53m (2011: USD nil), which was partially offset by a current tax charge of USD 0.16m. Finance cost for the Group for the year ended 31 March 2012 was USD 4.70m compared with USD 0.04m for the year ended 31 March 2011 which was due to an increase in borrowings which were USD 152.67m at 31 March 2012 compared to USD nil at 31 March 2011.
Net assets of the Group increased by 59% to USD 111.60m (2011: USD 70.34m) and the net assets per share by 59% to USD 0.68m (2011: USD 0.43m). The main movements in the balance sheet items were property, plant and equipment capitalised during the year and loans drawn down during the financial year. Property, plant and equipment increased to USD 371.21m as at 31 March 2012 (2011: USD 28.28m).
The cash used in operations during the year was USD 5.79m (2011: USD 3.01m). Investing activities for the year ended 31 March 2012 resulted in a cash outflow of USD 188.68m which was USD 137.87m higher than the year ended 31 March 2011. This was due to higher spend on property, plant and equipment. Net financing cash inflows were USD 214.09m (2011: USD 71.34m). The increase in financing cash inflows was mainly due to draw down of loan facilities, proceeds from issue of compulsory convertible debentures ("CCD") and compulsory convertible preference shares ("CCPS") during the year ended 31 March 2012 amounting to USD 123.85m (2011: USD 0.2m), USD 33.44m (2011: USD nil) and USD 69.47m (2011: USD nil) respectively. At 31 March 2012 the Group had cash and bank balances of USD 3.15m (2011: USD 16.86m).
At 31 March 2012 the Group had at its disposal USD 130.00m (2011: USD nil) of undrawn, committed borrowing facilities. The Group's net debt position has changed over the course of the year and is mainly on account of the drawdown of loan facilities during the year.
Strategy, Business and Operations Review
The delivery of wind energy projects is being managed across two phases. The Group has business partnership agreements with two leading global wind turbine manufacturers, Suzlon on a turnkey basis and Gamesa for our self-development phase. Post period, the Group has added ReGen, further diversifying our vendor relationships.
It is important to note that although short-term operational targets are of significance to the Group, with the funding and revenue generating assets of 316.2 MW now in place, we have greater visibility on the speed of delivering approximately 600 MW of our roll-out schedule by the first half of 2013. We have also demonstrated our ability to deliver assets at speed and at low cost that benchmarks well against our peers in the Indian market.
Mytrah is not just intending to become the number one wind IPP in India, but also aims to be a competitive cost and value based operator in the country to secure higher returns for shareholders. Specifically, we aim to achieve this through a combination of achieving project costs about 10% below the market benchmark, innovative financing and refinement in site selection and project implementation cycles. These will be significantly important and differentiating factors over our peers.
To achieve this, we have secured fixed terms for the delivery of 1,000 MW of capacity with Suzlon, which will help the Group achieve the objective of becoming the largest and lowest cost venture in the Indian wind energy sector. Importantly, the turnkey framework of our agreement with Suzlon removes the execution risk associated with developing these projects. Suzlon takes responsibility for managing and constructing the projects while Mytrah provides the wind turbine manufacturer with access to our ambitious roll-out schedule with a goal to achieve utility scale by 2017.
During the financial year, in May 2011, we signed our second agreement with a wind turbine manufacturer, Gamesa. This helps us implement our 'self-development model' where Mytrah will play a direct role in managing the execution of the projects and Gamesa will take responsibility for the manufacture, supply, erection and supply of the wind turbines for these sites.
Operational review
Subsequent to 31 March 2012, Mytrah has seven projects fully developed and connected to the grid totalling 316.2 MW:
Project Location | State | Capacity (MW) |
Tejva | Rajasthan | 42.0 |
Mahidad | Gujarat | 25.2 |
Chakala | Maharashtra | 39.0 |
Kaladongar | Rajasthan | 75.6 |
Jamanwada | Gujarat | 52.5 |
Sinner | Maharashtra | 18.9 |
Vajrakayur | Andhra Pradesh | 63.0 |
Total | 316.2 MW |
In addition we currently have a further 24 MW under development with Suzlon at Gotne in Maharashtra; we expected this project to be fully commissioned during the 2013 fiscal year. Including this project, the Group will have a fully commissioned and connected asset base of about 340.2 MW.
As announced earlier, the Company has reduced the size of its project at Sinner in Maharashtra by 10.5 MW to 18.9 MW, from the previously announced 29.4 MW, and has cancelled the project at Hanumanthappa, Karnataka (35.7 MW). In addition, we have also decided to cancel the 33 MW project at Vita, Maharashtra. The Board had become concerned about possible delays at these sites and therefore decided to redeploy the Group's resources to sites where we have greater visibility on the execution timetables. Upon cancellation of such projects, there are no penalties imposed on the Group and no adverse financial impact or uncertainty with respect to recovering amounts advanced to the main contractor Suzlon, as the Group's ability to claim liquidated damages is not affected by project cancellations. The Board believes that one of the significant advantages of the Group's business model is to be able to adapt to such circumstances by adjusting the size and locations of individual projects. In addition, and again due to the turnkey nature of its contracts, the Company does not incur an increase in the cost of the projects and has also realised any advances paid to the vendors. We believe that it is worth re-emphasising this point as its value cannot be underestimated, by redeploying the Company's resources. We believe that this will enable the Group to reach its target of over 600 MW by the first half of 2013 in the quickest and most efficient manner. We are aware of the many well reported cases of significant delays within the Indian infrastructure market and consider our ability to redeploy capital without any additional cost and avoiding being tied into delayed projects with rising costs a significant and unique advantage that Mytrah has over any of its competitors.
I am also pleased to inform that the Group's strategy of holding the project and turbine prices constant over a long period of time is now playing out as there has been some positive momentum on the regulatory side in terms of the feed in tariff; the Maharashtra State Electricity Board has recently increased its tariff from Rs. 5.37 per kWh to Rs. 5.67 per kWh and two of the Company's projects (Sinner and Gotne) in Maharashtra have benefited from this increase in tariff providing a significant increase in the overall return on these projects. In addition, the Rajasthan State Electricity Board has increased its tariff from Rs. 4.64 per KwH to Rs. 5.18 per Kwh that has benefited part of our Kaladongar project in that state and will also benefit our future portfolio. The Gujarat State Electricity Board has also announced a significant increase in feed in tariffs from Rs. 3.56 per Kwh to Rs. 4.61 per Kwh which will greatly benefit the Group's future portfolio. The Group expects the state of Andhra Pradesh to increase their tariffs in the near term followed by the state of Karnataka; again providing significant benefit to the Group's future portfolio. As the project cost has not changed any increase in the feed in tariff will have a favourable impact on the Company's financials.
All of our projects are under long-term (20-25 years) PPA's with the credible counter parties thus providing a very high visibility of revenues and profitability for the next 20-25 years.
The market for Renewable Energy Certificate ("REC") trading has stabilised since its emergence over a year ago and provides an opportunity to participate in generating higher revenues and value for our shareholders. Mytrah has contracted 27.30 MW capacity under the average power purchase cost (APPC) + REC scheme on its project at Jamanwada. The revenues and benefits under the REC would be visible in the second half of 2013 fiscal year.
A sharp depreciation in Indian currency by about 14.5% has not impacted the Company's performance at the India level. This is primarily due to all capital assets being procured in Indian Rupees as well as all loan liabilities being contracted in Indian Rupees. However, reporting at the Mytrah Energy Limited ("MEL") level, the impact of converting INR to USD is reflected in losses due to foreign exchange conversion.
Also, I am happy to report that all of our contracts are Indian Rupee based and the recent weakening of rupee against all major currencies is not expected to have any economic or cash impact on the Group and its businesses.
Future Growth and Development Portfolio
In addition to our existing development portfolio of 3,000 MW, this year we also signed a MoU with the Government of Andhra Pradesh under which we have received allotments/concessions for about 2,850 MW. This gives Mytrah an exclusive license, access and concessions for developing and owning 2,850 MW of wind capacity at sites that have been assessed as wind-rich in that state over the next seven years. We have also secured similar allotments with exclusive licenses, rights and concessions with Government of Karnataka for development and ownership of approximately 1,627 MW.
The availability of suitable sites in the wind-rich states is a valuable and finite resource. The acquisition of high quality development assets is a strategic priority for the long-term sustainability of the business and provides a competitive advantage as we begin the self-development phase of our strategy.
As at the year-end, our allotments and concessions secured across wind-rich locations in states in western and southern India, which include relevant leases and direct allotments, licences and sanctions from the respective state authorities for the installation of wind power generation farms, are at an estimated capacity of over 5,000 MW. The value of these assets are not reflected in our balance sheet and in the recent past some of our peers have valued and acquired similar assets for between $40,000 - $90,000 per MW. The Group has appointed a reputed third party to value the assets and expects the exercise to be completed by the end of March 2013.
We have continued the installation of wind masts to collect more wind data across our various sites and we now have more than 100 masts spread across all wind rich states and the results so far are very encouraging.
As I mentioned earlier, in an environment where identifying and executing projects with attractive returns is becoming an increasingly difficult task, as has been evident from the difficulties that most of our competition has faced, our team has done an outstanding job of identifying a further 270 MW of projects that meet and pass our stringent criteria in terms of risks of project execution, project cost and above normal returns. These projects are under advanced stages of development where construction is expected to begin in October/November 2012 and are targeted to be commissioned and generating power in stages by the first half of 2013. We are confident that these are some of the best assets in the country and are being developed at a cost that will deliver highly attractive returns to our shareholders.
Further, of our development portfolio mentioned above, about 500-700 MW is at a very advanced stage and can be commissioned as early as in the year 2014. We plan to start construction at some of these locations in mid-2013 with a target to commission the assets by mid-2014. I look forward to giving a further update on our development activities and more as the year progresses.
Asset Performance
The performance of the Group's assets so far has been extremely encouraging and is well over the Group's and its lenders' initial expectations. We look forward to covering this and more through a first half year update shortly.
Market Environment
There continues to be a significant shortage of power supply in India, with current capacity deficit of 11.2% at peak power demand and 8.3% at base power demand. With some 50% of rural areas not having access to the electricity grid, current electricity consumption per capita at only 25% of the Global average and urbanisation expected to increase from 28% to 41% by 2030, the energy sector in India provides a strong backdrop for growth underpinned by a substantial capacity deficit. Indeed, the demand for electricity is expected to continually grow by some 7% compound annual growth rate over the next 10 years.
The current Five Year plan called for an increase in total generation capacity to 342 GW by 2017. It is expected that this target will not be met with an estimated shortfall of between 55 GW - 60 GW by 2017. The country's installed capacity is approximately 200 GW and with the well-publicised difficulty in delivering cost-effective fossil fuel based power, Mytrah is in a strong position to benefit as the deficit continues to grow.
Due to the above-mentioned supply issues, recent advances in wind turbine technology and the opening of the electricity market to the private sector, the cost of wind power in India has almost reached 'Grid Parity' with traditional thermal power generation. This is particularly evident in Mytrah's case as the capital cost of our assets is estimated to be the lowest in the industry.
The fundamental market continues to move advantageously for Mytrah. As highlighted above over the last 18 months we have seen significant increases in long-term tariffs for wind generated electricity across all of our principal states while our project and asset prices remained at the same level. We believe we will continue to see increases in power tariffs flowing through to energy producers as the underlying prices charged to end consumers have increased and as India tries to address its continued significant power shortage.
As on the Balance Sheet date, we have registered aggregate capacity of 186 MW under different Special Purpose Vehicles for eligibility under the Generation Based Incentive ("GBI") scheme. Post 1 April 2012, the extension in GBI scheme has not been announced by the Government. Several representations have been made by renewable energy players and respective industry forums seeking extension in the GBI scheme which we believe is under active consideration of the Government and a notification to this effect is expected soon.
Whilst GDP growth in India has slowed over the last year it is still estimated to be in excess of 6.5%. In April 2012 the Reserve Bank of India cut interest rates by 0.5% and a further 0.25% cut in September 2012. Although the Rupee and inflation targets remain under pressure, we believe there is potential for further rate cuts over the coming year. As interest on our debt is our main operational cost, any reduction in interest rates provides a significant benefit to Mytrah.
Corporate
In order to support our rapid development, in January 2012 we were pleased to appoint Deutsche Bank as our Joint Broker alongside Mirabaud Securities. We believe that Deutsche Bank's involvement will provide us further reach to fulfil our growth potential.
Over the last year, we have spent a great deal of time and energy on developing a comprehensive framework for selecting, developing, implementing/executing and operating projects. We now have comprehensive standard operating procedures (SOPs) for all key activities, quality manuals, accounting manuals, SHE Policy and have also institutionalised a robust set of systems and processes that we believe are world class and compare with that of the best companies in the world in our sector. We expect these systems to create a long-term positive impact and put the organization on a path of strong and sustainable growth.
We have also taken further steps to broadly comply with the Quoted Companies Alliance Corporate Governance Guidelines for Smaller Quoted Companies.
To manage the growing scale and size of operations the Company recently implemented SAP and it went live successfully in July 2012.
In order to improve operational efficiency, the Directors have decided to reduce the Board to three Directors, namely myself, Russell Walls and Rohit Phansalkar.
Alastair Cade and Vikram Kailas will step down from the MEL board, but will continue in their current operational roles and will remain on the Board of our main operating subsidiary, Mytrah Energy (India) Limited (MEIL). Both Philip Swatman and Peter Neville will not be seeking re-election at the Annual General Meeting on 8 November 2012. I would like to place on record my appreciation for their valuable contribution and to thank both Philip and Peter for their support of Mytrah during their tenure.
Human Capital
The recent developments in the Indian power sector have laid the road ahead for Mytrah's rapid growth in terms of building strong presence not only in the wind energy space but also in other forms of renewable energy generation.
Keeping in mind the targeted capacity the Company grew from 24 to 91 employees over the last financial year. 70% of the employees belong to the wind business.
During the year, our HR Policies were benchmarked with the best in industry practices and standardised for transparency and consistency. This was important as we grew and attracted talent from across various industries and sectors.
The performance management process was also rolled out to ensure that goals and deliverables were captured and assessed for compensation increases. During the last year we had 85 employees who went through the appraisal process.
During the rapid growth phase, it was important that we built an organisational culture that had values institutionalised. The core values of Mytrah were formalised in line with the Mission statement. The five core values are Integrity, Creativity, Excellence, Respect for individuals and being Socially Responsible. Our reward mechanisms would ensure that positive adherence to these values are recognised. We have scheduled Value workshops to reiterate the core values across the organization,
Although talent scouting and retention remain a challenge in this space, Mytrah was able to attract and retain critical talent with an employee turnover percentage of only 2% which is much below the average attrition of 15-20% in our sector.
In our pursuit of the massive capacity expansion plans and the need to get direct employability skills, it was important that we devise new ways to attract and retain talent in the crucial phase. The organisation has embarked into a few retention strategies to overcome the demand for trained personnel comprising skilled engineers, supervisors and managers including:
a) Campus Hiring: Hiring a captive talent pool into the organisation to meet the growing talent demands. A contractual commitment is sought from employees to recover the investments made in training.
b) Learning & Development through opportunities to hone specialised skills. Deploying employees on short-term engagements in other areas coupled with on-site deployment.
c) Talent Management Practices: Focusing on rewarding competencies that contribute to exceptional business performance in light of retaining talent.
We continue to grow and are a 156 strong human capital base (70% forming the wind business) at the end of the first quarter of the financial year 2012-13.
We have also taken on office space across India to ensure easier access to resources and administration. We have a total of 11 offices across India that include five site offices, five regional offices and the corporate office at Hyderabad.
Corporate and Social Responsibility ("CSR")
All activities in respect of the construction of our wind farms have been undertaken by Suzlon under our turnkey phase I of our strategy. All activities, including social CSR activities and compliance with applicable standards set out in Indian environmental legislation are undertaken by Suzlon and are monitored internally to ensure our CSR standards are being met.
As we initiate phase II of our strategy and self-develop our wind farms we will have a comprehensive CSR policy and procedures in place. Details will be posted on our corporate website in due course and set out in our next annual report.
Mytrah is committed to promoting the health, safety and welfare of our people. Employees are expected to follow health and safety policies and procedures and make management aware of potential safety hazards.
Business Outlook
This year has been transformational for Mytrah and we are confident that we have built a strong investment proposition based on generating reliable and long-term cash flows through the development of wind projects in India. Based on this, the coming months are set to be highly active and progressive for Mytrah as we rapidly deploy our funds to develop the Company's operational and corporate standing within the Indian energy sector and consolidate our position as a leading wind IPP in the country.
Finally, I would like to take this opportunity to thank our shareholders, team, advisers and associates for their support over the period as we execute our ambitious strategy and continue to deliver a profitable utility scale generating capacity.
Ravi Shankar Kailas
Chairman and CEO
27 September 2012
Consolidated income statement for the | ||||
year ended 31 March 2012 | ||||
Notes | Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | |||
Continuing operations | ||||
Revenue | 6 | 6,973,960 | - | |
Cost of sales | (3,447,415) | - | ||
|
| |||
Gross profit | 3,526,545 | - | ||
Administrative expenses | (4,323,041) | (2,301,376) | ||
Operating loss | 7 |
(796,496) |
(2,301,376) | |
Investment income | 10 | 764,863 | 999,830 | |
Other gains and losses | 11 | 531,562 | 141,648 | |
Finance costs | 12 | (4,702,595) | (37,082) | |
|
| |||
Loss before tax | (4,202,666) | (1,196,980) | ||
Taxation | 13 | 1,370,067 | (378,423) | |
|
| |||
Loss for the year from continuing operations attributable to the equity holders of the Company | (2,832,599) | (1,575,403) | ||
|
| |||
Loss per share from continuing operations | ||||
Basic and diluted | 14 | (0.0173) | (0.0096) | |
|
|
Consolidated statement of comprehensive income for the | ||||
year ended 31 March 2012 | ||||
Year ended 31 March 2012 | Year ended 31 March 2011 | |||
USD | USD | |||
Loss for the year from continuing operations attributable to the equity holders of the Company | (2,832,599) | (1,575,403) | ||
Other comprehensive loss Exchange differences on translating foreign operations | (12,021,898) | (929,328) | ||
Net gain arising on revaluation of available-for-sale financial assets during the year | 31,656 | - | ||
|
| |||
Other comprehensive loss for the year | (11,990,242) | (929,328) | ||
|
| |||
Total comprehensive loss for the year attributable to the owners of the Company | (14,822,841) | (2,504,731) | ||
|
|
| ________________ | ______________ |
Consolidated statement of financial position as at 31 March 2012 | ||||
| Notes | 31 March 2012 | 31 March 2011 | |
USD | USD | |||
Assets | ||||
Non-current assets | ||||
Intangible assets | 15 | 64,881 | - | |
Property, plant and equipment | 16 | 371,212,559 | 28,283,068 | |
Other non-current assets | 17 | 5,494,591 | 1,645,436 | |
Held-to-maturity financial asset | 18 | 964,281 | - | |
Deferred tax assets | 19 | 4,406,597 | - | |
|
| |||
Total non-current assets | 382,142,909 | 29,928,504 | ||
Current assets | ||||
Trade and other receivables | 20 | 7,056,394 | - | |
Advances and other current assets | 21 | 43,449,861 | 31,010,598 | |
Investment in mutual fund units and bonds - available-for-sale | 18 | 4,787,630 | - | |
Cash and bank balances | 22 | 3,151,975 | 16,861,883 | |
|
| |||
Total current assets | 58,445,860 | 47,872,481 | ||
|
| |||
Total assets | 440,588,769 | 77,800,985 | ||
|
| |||
Liabilities | ||||
Current liabilities | ||||
Borrowings | 23 | 2,281,959 | - | |
Trade and other payables | 24 | 159,224,484 | 7,115,519 | |
Retirement benefit obligations | 25 | 22,795 | - | |
Tax liabilities | 13 | 480,717 | 340,961 | |
|
| |||
Total current liabilities | 162,009,955 | 7,456,480 | ||
|
| |||
Non-current liabilities | ||||
Borrowings | 23 | 150,392,048 | - | |
Liability component of CCPS | 26 | 11,435,270 | - | |
Derivative financial instruments | 32 | 2,779,637 | - | |
Retirement benefit obligations | 25 | 43,166 | - | |
Deferred tax liability | 19 | 2,323,810 | - | |
----_______________ | ----_______________ | |||
Total non-current liabilities | 166,973,931 | - | ||
_______________ | ________________ | |||
Total liabilities | 328,983,886 | 7,456,480 | ||
|
| |||
Net assets | 111,604,883 | 70,344,505 | ||
|
| |||
Equity | ||||
Share capital | 27 | 72,858,278 | 72,858,278 | |
Retained earnings | 28 | (4,583,064) | (1,750,465) | |
Other reserves | 29 | (12,065,503) | (763,308) | |
________________ | ________________ | |||
Equity attributable to owners of the Company | 56,209,711 | 70,344,505 | ||
Non-controlling interest | 30 | 55,395,172 | - | |
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| |||
Total equity | 111,604,883 | 70,344,505 | ||
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These financial statements were approved by the Board of Directors and authorised for use on 27 September 2012
Signed on behalf of the Board of Directors by:
Ravi Shankar Kailas Vikram Kailas
Chairman and CEO Chief Financial Officer and Director
| Consolidated statement of changes in equity for the year ended 31 March 2012 | |||||||||||||||||||||
Invested capital | Share capital | Re-translation reserve | Equity- settled- employee- benefits reserve | Available-for- sale asset reserve | Retained earnings | Non-controlling interests | Total |
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USD | USD | USD | USD | USD | USD | USD | USD |
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Balance as at 31 March 2010 | 233 | - | (3,752) | - | - | (175,062) | - | (178,581) |
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Loss for the year | - | - | - | - | - | (1,575,403) | - | (1,575,403) |
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Other comprehensive loss for the year | - | - | (929,328) | - | - | - | - | (929,328) |
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Total comprehensive loss for the year | - | - | (929,328) | - | - | (1,575,403) | - | (2,504,731) |
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Issue of shares to shareholders of Bindu Vayu (Mauritius) Limited | 39,767 | - | - | - | - |
- | - |
39,767 |
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Transfer of shares to shareholders of Mytrah Energy Limited | (40,000) | 40,000 | - | - | - |
- | - |
- |
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Issue of shares on IPO | - | 79,241,910 | - | - | - | - | - | 79,241,910 |
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Share issue costs on IPO | - | (6,423,632) | - | - | - | - | - | (6,423,632) |
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Equity-settled-share-based payments | - | - | - | 169,772 | - | - | - | 169,772 |
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Balance as at 31 March 2011 | - | 72,858,278 | (933,080) | 169,772 | - | (1,750,465) | - | 70,344,505 |
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Loss for the year | - | - | - | - | - | (2,832,599) | - | (2,832,599) |
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Other comprehensive loss for the year: |
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Exchange differences on translating foreign operations | - | - | (12,021,898) | - | - | - | - | (12,021,898) |
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Net gain arising on revaluation of investments in mutual funds and bonds | - | - | - | - | 31,656 | - | - | 31,656 |
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Issue of CCPS (note 26) | - | - | - | - | - | - | 57,937,332 | 57,937,332 |
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Deferred tax on share issue costs (note 19) | - | - | - | - | - | - | (651,753) | (651,753) |
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Share issue costs on issue of CCPS (note 26) | - | - | - | - | - | - | (1,891,056) |
(1,891,056) |
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Issue of equity shares of MEIL to IIF (note 26) | - | - | - | - | - | - | 649 |
649 |
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Equity settled share based payments | - | - | - | 688,047 | - | - | - | 688,047 |
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Balance as at 31 March 2012 | - | 72,858,278 | (12,954,978) | 857,819 | 31,656 | (4,583,064) | 55,395,172 | 111,604,883 |
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Consolidated statement of cash flow for the year ended 31 March 2012 | ||||
| Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | |||
Cash flows from operating activities | ||||
Loss from operations before tax | (4,202,666) | (1,196,980) | ||
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| |||
Adjustments: | ||||
Equity settled employee benefits | 688,047 | 169,772 | ||
Depreciation and amortisation | 3,282,153 | 18,291 | ||
Finance costs | 4,702,595 | 37,082 | ||
Gain on sales of mutual funds | (815,356) | (1,141,478) | ||
Loss on the fair value of CCPS and CCDs | 283,794 | - | ||
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| |||
Operating cash flows before working capital changes | 3,938,567 | (2,113,313) | ||
Movements in working capital: | ||||
Increase in loans and advances | (3,535,685) | - | ||
Increase in trade & other receivables | (6,417,327) | - | ||
Increase in other current assets | (786,401) | (1,087,974) | ||
Increase in trade and other payables | 2,389,571 | 233,000 | ||
Interest paid | (1,380,922) | - | ||
Direct taxes paid | - | (37,462) | ||
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| |||
Net cash used in operating activities | (5,792,197) | (3,005,749) | ||
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| |||
Purchase of property, plant and equipment | (179,175,468) | (51,791,346) | ||
Purchase of intangible asset | (77,392) | - | ||
Interest paid | (4,599,144) | - | ||
Investment in mutual funds | (177,469,370) | (106,630,452) | ||
Redemption of mutual funds units | 173,526,481 | 106,772,100 | ||
Investment in held to maturity investments | (889,785) | - | ||
Investment income | - | 836,387 | ||
|
| |||
Cash used in investing activities | (188,684,678) | (50,813,311) | ||
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| |||
Cash flows from financing activities | ||||
Proceeds from the issue of shares | 649 | 79,241,910 | ||
Proceeds from the issue of CCPS | 69,466,753 | - | ||
Issue costs for CCPS | (1,891,056) | (6,423,632) | ||
Loan facilities fee | - | (1,440,086) | ||
Proceeds from the issue of CCDs | 33,439,124 | - | ||
Issue costs of CCDs | (388,848) | - | ||
Capital advances | (10,388,450) | - | ||
Loans received | 123,851,428 | 220,822 | ||
Loans repaid | - | (220,822) | ||
Interest paid | - | (37,082) | ||
|
| |||
Cash generated by finance activities | 214,089,600 | 71,341,110 | ||
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| |||
Net increase in cash and cash equivalents | 19,612,725 | 17,522,050 | ||
Cash and cash equivalents at beginning of the year | 16,861,883 | 229,394 | ||
Net effect of foreign currency translation to presentation currency | (33,322,633) | (889,561) | ||
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| |||
Cash and cash equivalents at end of the year | 3,151,975 | 16,861,883 | ||
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|
Notes to the consolidated financial statements for the year ended 31 March 2012
1. General information
Mytrah Energy Limited ("MEL" or the "Company") is a non-cellular company liability limited by shares incorporated on
13 August 2010 under the Companies (Guernsey) Law, 2008. The address of the registered office is Anson Place, Mill Court, La Charroterie, St. Peter Port, Guernsey GY1 1EJ. Mytrah Energy Limited has the following subsidiary undertakings, (together the "Group"), all of which are directly or indirectly held by the Company, for which consolidated financial statements are being prepared, as set out below:
Subsidiary | Country of incorporation or residence | Proportion of ownership interest(per cent.) | Proportion of voting power (per cent.) | Activity |
Bindu Vayu (Mauritius) Limited ("BVML") | Mauritius | 100 | 100 | Holding company |
Mytrah Energy (India) Limited ("MEIL") 1 | India | 99.99 | 99.99 | Operating company |
Bindu Vayu Urja Private Limited ("BVUPL") 2 | India | 99.99 | 99.99 | Operating company |
Mytrah Vayu Pennar Private Limited ("MVPPL") 3 | India | 99.99 | 99.99 | Operating Company |
(1) Non-controlling interests:
A. Under Indian law a public company must have at least seven members. Sixty shares are held by the following shareholders: Ravi Kailas, Angad Paul, Vikram Kailas, Sree Ramulu Kailas, Uma Thondepu and Vasudevi Kailas.
B. As part of the agreement to issue compulsory convertible preference shares ("CCPS"), the India Infrastructure fund ("IIF") was issued with 100 ordinary shares in MEIL.
(2) Incorporated in January 2011 and acquired by MEIL on 4 October 2011. The effective interest is as noted above as this is a wholly-owned subsidiary of MEIL.
(3) Incorporated in December 2011 as a wholly-owned subsidiary of MEIL.
The principal activity of the Company is to operate wind energy farms as a leading independent power producer, and to engage in the sale of energy to the Indian market through the Company's Indian subsidiaries, MEIL, BVUPL and MVPPL.
2. Adoption of new and revised standards and interpretations
In the current year, the following new and revised standards and interpretations have been adopted by the Group, none of which had a material impact on the current year or prior period reported results or financial position:
Standard Or Interpretation | Effective For Reporting Periods Starting On Or After | |
IFRS 7 | Financial Instruments: Disclosures Amendments enhancing disclosures about transfers of financial assets | Annual periods beginning on or after 1 July 2011 |
IFRS 7 | Financial Instruments disclosure-Amendments resulting from May 2010 annual improvements to IFRS | Annual periods beginning on or after 1 January 2011 |
IAS 24 | Related Party Disclosures - Revised Definition Of Related Parties | Annual periods beginning on or after 1 January 2011 |
IAS 34 | Interim Financial Reporting- Amendments resulting from May 2010 annual improvements to IFRSs | Annual periods beginning on or after 1 January 2011 |
At the date of authorisation of the financial statements, the following standards and interpretations, have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been endorsed by the EU).
Standard Or Interpretation | Effective For Reporting Periods Starting On Or After | |
IFRS 1 | Borrowing costs | Annual periods beginning on or after 1 January 2013 |
IFRS 7 | Amendments to IFRS 7 and IAS 32 - Offsetting Financial Assets and Financial Liabilities | Annual period beginning on or after 1 January 2013 and 1 January 2014 |
IFRS 9 | Financial Instruments | Annual periods beginning on or after 1 January 2015 |
IFRS 10 | Consolidated Financial Statements | Annual periods beginning on or after 1 January 2013 |
IFRS 11 | Joint Arrangements | Annual periods beginning on or after 1 January 2013 |
IFRS 12 | Disclosure of Interests in Other Entities | Annual periods beginning on or after 1 January 2013 |
IFRS 13 | Fair Value Measurement | Annual periods beginning on or after 1 January 2013 |
IAS 1 | Presentation of Financial Statements Amendments resulting from May 2010 Annual Improvements to IFRSs | Annual periods beginning on or after 1 January 2013 |
IAS 1 | Presentation of Financial Statements Amendments to revise the way other comprehensive income is presented | Annual periods beginning on or after 1 July 2012 |
IAS 12 | Income Taxes Limited scope amendment (recovery of underlying assets) | Annual periods beginning on or after 1 January 2012 |
IAS 19 | Employee Benefits - Amended Standard resulting from the Post-Employment Benefits and Termination Benefits projects | Annual periods beginning on or after 1 January 2013 |
IAS 27 | Consolidated and Separate Financial Statements Amendments resulting from May 2010 Annual Improvements to IFRSs | Annual periods beginning on or after 1 July 2010 |
IAS 27 | Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (as amended in 2011) | Annual periods beginning on or after 1 January 2013 |
IAS 28 | Investments in Associates - Reissued as IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) | Annual periods beginning on or after 1 January 2013 |
Based on the Company's current business model and accounting policies, management does not expect that the adoption of these standards or interpretations will have a material impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.
3 Significant accounting policies
Basis of accounting
These consolidated financial statements have been prepared in accordance with and comply with IFRS as adopted by the European Union.
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The Directors have taken advantage of the exemption offered by Section 244 (5) of the Companies (Guernsey) Law, 2008 from preparation of individual financial statements of the Company as the Company is preparing and presenting consolidated financial statements for the financial year ended 31 March 2012 and the comparative period.
These financial statements are presented in US dollars (USD). Foreign operations are included in accordance with the policies set out in note 3.
The financial information in this announcement, which was approved by the Board of Directors on 27 September 2012 does not constitute the Group's statutory accounts for the years ended 31 March 2012 and 2011, but is derived from those accounts. The auditor has reported on those accounts; their report is unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under sections 263(2) and 263(3) of The Companies (Guernsey) Law, 2008.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company will publish the full financial statements for the Group that comply with IFRS by end of September 2012.
Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategy, Business and Operations Review. The financial position of the Group and its cash flows are described in the financial review on page 6. In addition, note 32 of the financial statements included the Group's objectives, details of its financial instruments and hedging activities, and its exposure to credit risk and liquidity risk.
As highlighted in note 32 of the financial statements, the Group meets its day-to-day working capital requirements by maintaining adequate reserves, banking facilities and reserve borrowing facilities. Subsequent to year end, the Group made further capital commitments of USD 200.10 m in addition to the existing capital commitments of USD 63.90 m at the year end. These capital commitments are in relation to the supply of additional wind farm assets, the supply of which the Directors consider are an integral part of their business plan. The Group forecast shows that it has USD 285m of funding to fund these projects, with USD 265 m already secured at the date of approval of these financial statements and do not indicate there will be any breaches of covenants associated with these funding.
The Group's forecasts and projections, taking into account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. In addition, the Directors believe that the Group's maximum liability under the agreements is capped at a level well within available resources.
Therefore, after making enquiries and assessing the Group's financial position, anticipated future performance, its available and planned bank facilities and capital expenditure plans, together with other risks facing the Group, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Foreign currencies
The consolidated financial statements are presented in USD, which is the presentational currency of the Company, as the financial statements will be used by international investors and other stakeholders because the Company's shares are listed on AIM. The functional currency of the parent company is sterling ("GBP"). The functional currency of the main operating subsidiary of the Group is Indian Rupees ("INR").
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into US dollars (USD) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive loss and accumulated in equity.
The USD: INR exchange rates used to translate the INR financial information into the presentation currency of USD were as follows:
2012 | 2011 | ||
Closing rate at 31 March | 51.8521 | 45.2854 | |
Average rate for the year ended 31 March | 48.1335 | 45.6164 |
The GBP: USD exchange rates used to translate the GBP financial information into the presentation currency of USD were as follows:
2012 | 2011 | ||
Closing rate at 31 March | 1.5987 | 1.5834 | |
Average rate for the year ended 31 March | 1.5963 | 1.6032 |
Revenue Recognition
Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably.
Sale of electricity
Revenue from the sale of electricity is recognised when earned on the basis of contractual arrangements and reflects the number of units supplied in accordance with joint meter readings undertaken on a monthly basis by representatives of the buyer and the Group at rates stated in the contract or as applicable, net of any actual or expected trade discounts.
Generation-based incentives
Revenue from generation-based incentives are recognised based on the number of units supplied at INR 0.50 (~USD 0.01) per unit, when registration under the relevant programme has taken place and its eligibility criteria met under the Indian Renewable Energy Development Agency Limited - Generation Based Incentive scheme.
Financial instruments
Financial instruments
Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs.
Financial assets within the scope of IAS 39 are classified into the following specified categories as:
• loans and receivables
• financial assets at fair value through profit or loss
• available-for-sale financial assets
• held-to-maturity investments.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Effective Interest Rate method
The effective interest method is a method of calculating the amortised cost of a financial asset held at amortised cost and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Investment income is recognised on an effective interest basis for debt instruments.
Loans and receivables (including cash and bank balances)
Cash and bank balances and trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Cash and bank balances comprise cash in hand and cash at bank or deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of change in value.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss include financial assets that are held for trading or are designated by the entity to be carried at fair value through profit or loss upon initial recognition. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with gains or losses recognised in the profit or loss.
Financial instruments (continued)
Available-for-sale financial assets
Listed shares and listed redeemable notes held by the Group that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss.
The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the balance sheet date. The foreign exchange gains or losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity. Investments are classified as held-to-maturity if it is the positive intention and ability of Group's management to hold them until maturity. Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognised in the consolidated statement of comprehensive income when the investments are derecognised or impaired, as well as through the amortisation process. In addition, if there is objective evidence that the investment has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the investment are recognised in profit or loss.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Compound instruments
The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised costs basis using the effective interest method until extinguished upon conversion or at the instruments' maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.
Financial liabilities
Financial liabilities are initially measured at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or settled within 12 months.
Property, plant and equipment
Initial recognition
Property, plant and equipment are recognised as assets in the statement of financial position if it is probable that the Group will derive future economic benefits from them and the cost of the asset can be reliably estimated.
Items of property, plant and equipment are stated at cost less accumulated depreciation and any provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Advances paid in respect of work that is yet to be performed is classified as an advanced payment within other assets in the consolidated statement of financial position.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised within "other income" for gains and "other operating expenses" for losses in the income statement.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs of those assets. Qualifying assets are those that take a substantial period of time to prepare for their intended use. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are expensed in the period in which they are incurred.
Depreciation
Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives after taking into account their estimated residual value, using the straight-line method as stated below:
Furniture and Fittings 5 years
Office Equipment 4-5 years
Computers 4 years
Vehicles 5 years
Plant and Machinery 5 to 20 years
Buildings 20 years
Lease acquisition costs and leasehold improvements are depreciated over the primary period of the lease or estimated useful lives of the assets, whichever is less. Assets under construction are not depreciated, as they are not ready for use.
The depreciation methods, useful lives and residual value, are reassessed annually.
Impairment
At each reporting date, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in future years and it further excludes items that are permanently exempt from tax or allowable as a tax deduction. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the
deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, and it is probable that an outflow of resources, that can reliably be required to settle such an obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows to net present value using an appropriate pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Unwinding of the discount is recognised in the consolidated income statement as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.
A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the amount of the obligation cannot be measured reliably. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside profit or loss and presented in other comprehensive income.
Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in the future contributions to the scheme.
Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 34.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
SAYE share options granted to employees are treated as cancelled when employees cease to contribute to the scheme. This results in accelerated recognition of the expenses that would have arisen over the remainder of the original vesting period.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future period.
Critical judgements and estimates in applying the Group's accounting policies
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Useful life of depreciable assets
Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the Group and any change in useful lives and methods of depreciation are adjusted prospectively if appropriate.
Classification of financial instruments as equity or liability
Significant judgement is required to apply the rules under IAS 32, Financial Instruments: Presentation and IAS 39: Financial Instruments: Recognition and Measurement to assess whether an instrument is equity or a financial liability. Management has exercised significant judgement to evaluate the terms and conditions of certain financial instruments with reference to the applicability of contingent settlement provisions, evaluation of whether options under the contract will be derivative or a non-derivative, assessing if certain settlement terms are within the control of the Company and if not whether the occurrence of these events are extremely rare, highly abnormal and very unlikely, clarifications between the parties to the agreement subsequent to the date of the agreement to conclude that the instruments be classified as an equity instrument.
Deferred tax assets
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in India in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.
Held-to-maturity financial assets
The Directors have reviewed the Group's held-to-maturity financial assets in the light of its capital maintenance and liquidity requirements and have confirmed the Group's positive intention and ability to hold those assets to maturity. The carrying amounts of the held-to-maturity financial assets is USD 964,281 (2011: USD nil). Details of these assets are set out in note 18.
Impairment of fixed assets
The determination of recoverable amounts of the CGUs assessed in the annual impairment test requires the Group to estimate the fair value net of disposal costs as well as value in use. The assessment of value in use requires assumptions to be made with respect to the operating cash flows of the CGUs as well as the discount rates.
Recoverability of trade receivables
The Group analyses the historical payment patterns of customers, customer concentrations, customer creditworthiness and current economic trends on an ongoing basis. If the financial condition of a customer deteriorates, additional provision is made in the accounts (see note 20).
5. Segment information
IFRS 8 establishes standards for the way to report information on operating segments and related disclosures about products and services, geographic areas, and major customers. The Group operations predominantly relate to generation and sale of electricity. The chief operating decision maker evaluates the Group performance and allocates resources based on an analysis of various performance indicators at operational unit level. Accordingly there is only a single operating segment "generation and sale of electricity". Consequently no segment disclosures of the Group are presented.
The Group has all of its non-current assets located within India and earn its revenues from customers located in India.
6. Revenue
An analysis of the Group's revenue is as follows:
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
USD | USD | ||
Sale of electricity | 6,254,838 | - | |
Generation Based Incentive | 719,122 | - | |
Total revenue | 6,973,960 | - | |
Other gains and losses (note 11) |
531,562 | 141,648 | |
Investment income (note 10) | 764,863 | 999,830 | |
Total revenue as defined in IAS 18 | 8,270,385 | 1,141,478 |
All revenue is from continuing operations.
Revenue from two customers relating to power generating activities represent USD 6,254,838 (2011: USD nil) of the total revenue.
7. Loss for the year
Loss for the year has been arrived at after charging:
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
USD | USD | ||
Continuing operations | |||
Net foreign exchange losses | 14,517 | - | |
Amortisation of intangible assets (note 15) | 12,511 | - | |
Depreciation of property, plant and equipment (note 16) | 3,269,642 | 18,291 | |
Staff costs (note 9) | 2,313,401 | 792,369 | |
8. Auditor's remuneration
The analysis of the auditor's remuneration is as follows:
Year ended31 March2012 USD | Year ended31 March2011 USD | ||
Fees payable to the Company's auditor and their associates for the: | |||
audit of the Company's annual accounts | 111,741 | 56,800 | |
audit of the Company's subsidiaries pursuant to legislation | 47,668 | 18,400 | |
Total audit fees | 159,409 | 75,200 | |
Audit related assurance services |
44,696 | - | |
Other services pursuant to legislation (Reporting accountant services as part of IPO) | - | 128,000 | |
Total non-audit fees | 44,696 | 128,000 |
9. Staff Costs
The average monthly number of employees (including executive Directors) was:
2012 | 2011 | ||
Number | Number | ||
Operations and projects | 20 | 3 | |
Corporate and administration | 24 | 4 | |
Business development | 9 | - | |
Executive and non-executive Directors | 9 | 7 | |
62 | 14 |
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Staff other than Directors and key management personnel: | |||
Salaries | 413,400 | 121,200 | |
Contribution to provident fund (note 25) | 55,660 | - | |
Staff welfare | 64,953 | 5,537 | |
Gratuity and leave encashment (note 25) | 70,331 | - | |
604,344 | 126,737 | ||
Directors and key management personnel: | |||
Salaries | 1,021,010 | 495,860 | |
Share-based payment expense (note 34) | 688,047 | 169,772 | |
2,313,401 | 792,369 |
10. Investment income
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Interest on held-to-maturity investments | 75,379 | - | |
Interest on deposits | 689,484 | 999,830 | |
Total investment income | 764,863 | 999,830 |
11. Other gains and losses
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Gain on derivative instruments within CCDs | 39,921 | - | |
Loss on derivative instruments within CCPS | (323,715) | - | |
Gain on disposal of available for sale investments | 815,356 | 141,648 | |
Total other gains and losses recognised in loss for the year | 531,562 | 141,648 |
Available-for-sale financial assets represent investments in mutual funds and redeemable bonds. During the year disposals of available-for-sale investments resulted in a gain of USD 815,356 (2011: USD 141,648), and the change in fair value of the derivative instruments within CCDs resulted in a gain of USD 39,921. Gains were partially offset by the change in fair value of the derivative instruments within CCPS of USD (323,715) (2011: USD nil).
12. Finance costs
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Continuing operations: | |||
Interest on financial liabilities | (9,134,476) | - | |
Other borrowing costs | (167,263) | (37,082) | |
Total interest expense | (9,301,739) | (37,082) | |
Less: amounts included in the cost of qualifying assets | 4,599,144 | - | |
Total finance cost recognised in the income statement | (4,702,595) | (37,082) |
Amounts included in the cost of qualifying assets during the year arose on borrowings sanctioned for the purpose of financing construction of a qualifying asset and it represents the actual borrowing costs incurred on those borrowings, calculated using the effective interest rate method.
13. Taxation
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Continuing operations | |||
Current year tax charge | 159,221 | 378,423 | |
Deferred tax credit (note 19) | (1,529,288) | - | |
Taxation | (1,370,067) | 378,423 | |
The credit for the year can be reconciled to the loss per the income statement as follows:
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Loss before tax on continuing operations | (4,202,666) | (1,196,980) | |
Enacted tax rates | 32.45% | 33.22% | |
Tax on loss at enacted tax rate | 1,363,765 | 397,637 | |
Permanent differences | 6,302 | - | |
MAT charge | (159,221) | - | |
MAT deferred tax credit | 159,221 | - | |
Tax effect of losses that cannot be carried forward (see below) | - | (776,060) | |
Taxation | 1,370,067 | (378,423) |
The Company is exempt from Guernsey income tax under the Income Tax (Exempt bodies) (Guernsey) Ordinance, 1989 and is subject to an annual feeof USD 962. As such, the Company's tax liability is zero. However considering that the Company's operations are entirely based in India, the effective tax rate of the Group of 32.60% has been computed based on the current tax rates prevailing in India.
The Indian income tax rate decreased from 33.22% to 32.45% with effect from assessment year 2011-12. Indian companies are subject to corporate income tax or Minimum Alternate Tax ("MAT"). If MAT is greater than corporate income tax then MAT is levied. The Company has recognised MAT of USD 159,221 as MAT is greater than corporate income tax for the current period. In the prior year, the Company was not liable for MAT as the Company did not have any taxable profits.
In the prior period, a permanent difference between tax losses and book losses arose as current Indian tax law does not allow losses incurred before trading commences to be carried forward.
Income tax recognised directly in equity
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in equity:
| As at 31 March 2012 | As at31 March 2011 | |
USD | USD | ||
Deferred tax credit | 702,105 | - | |
Foreign exchange loss on deferred tax credit | (50,352) | - | |
Total income tax recognised directly in equity | 651,753 | - | |
Tax Liabilities | As at 31 March 2012 | As at31 March 2011 | |
USD | USD | ||
Current tax liabilities | 480,717 | 340,961 | |
Total current tax liabilities | 480,717 | 340,961 |
14. Earnings per share
Basic earnings per share is calculated by dividing loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.
Options to purchase ordinary shares that were excluded from the computation of diluted earnings per share because they are anti-dilutive were 14,708,689 at 31 March 2012, and 4,877,400 at 31 March 2011.
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Basic and diluted | |||
Loss attributable to the equity holders of the Company | (2,832,599) | (1,575,403) | |
Weighted average number of ordinary shares outstanding during the period | 163,636,000 | 163,636,000 | |
Basic and diluted loss per share | (0.0173) | (0.0096) |
15. Intangible assets
Application software USD | |
Cost at 1 April 2011 | - |
Additions | 77,392 |
Balance at 31 March 2012 | 77,392 |
Amortisation at 1 April 2011 | - |
Charge for the year | 13,478 |
Exchange differences | (967) |
At 31 March 2012 | 12,511 |
Carrying amount | |
At 31 March 2012 | 64,881 |
At 31 March 2011 | - |
The amortisation period for application software is four years.
16. Property, plant and equipment
Furniture and fittings | Office equipment | Computers | Vehicles | Leasehold improvements | Wind farm assets under course of construction | Total | |
USD | USD | USD | USD | USD | USD | USD | |
Opening cost as at 1 April 2010 | 4,165 | 10,884 | 19,111 | - | - | - | 34,160 |
Additions | - | 6,057 | 9,800 | 59,688 | 51,335 | 28,142,189 | 28,269,069 |
Exchange difference | (14) | (34) | (61) | - | - | - | (109) |
Balance at31 March 2011 | 4,151 | 16,907 | 28,850 | 59,688 | 51,335 | 28,142,189 | 28,303,120 |
Accumulated depreciation as at1 April 2010 | 147 | 617 | 997 | - | - | - | 1,761 |
Depreciation expense | 1,703 | 3,331 | 5,559 | 4,564 | 3,134 | - | 18,291 |
Balance as at31 March 2011 | 1,850 | 3,948 | 6,556 | 4,564 | 3,134 | - | 20,052 |
Net book value as at31 March 2011 | 2,301 | 12,959 | 22,294 | 55,124 | 48,201 | 28,142,189 | 28,283,068 |
| Furniture and fittings | Office equipment | Land and Buildings | Plant and Machinery | Computers | Vehicles | Leasehold improvements | Wind farm assets under course of construction | Total |
USD | USD | USD | USD | USD | USD | USD | USD | USD | |
Opening cost as at 1 April 2011 | 4,151 | 16,907 | - | - | 28,850 | 59,688 | 51,335 | 28,142,189 | 28,303,120 |
Additions | 68,161 | 42,392 | 579,108 | - | 134,433 | 274,846 | 189,707 | 344,693,915 | 345,982,562 |
Transfers | - | - | - | 203,397,158 | - | - | - | (203,397,158) | - |
Exchange difference | (526) | (2,142) | - | - | (3,654) | (7,559) | (6,501) | - | (20,382) |
Balance at31 March 2012 | 71,786 | 57,157 | 579,108 | 203,397,158 | 159,629 | 326,975 | 234,541 | 169,438,946 | 374,265,300 |
Accumulated depreciation as at1 April 2011 | 1,850 | 3,948 | - | - | 6,556 | 4,564 | 3,134 | - | 20,052 |
Depreciation expense | 11,956 | 8,254 | 16,032 | 3,145,166 | 28,895 | 40,741 | 18,598 | - | 3,269,642 |
Exchange difference | (1,093) | (1,093) | (1,150) | (225,557) | (2,829) | (3,500) | (1,731) | - | (236,953) |
Balance as at31 March 2012 | 12,713 | 11,109 | 14,882 | 2,919,609 | 32,622 | 41,805 | 20,001 | - | 3,052,741 |
Net book value as at31 March 2012 | 59,073 | 46,048 | 564,226 | 200,477,549 | 127,007 | 285,170 | 214,540 | 169,438,946 | 371,212,559 |
17. Other non-current assets
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Deposits | 414,771 | 205,350 | |
Prepayments | 5,079,820 | 1,440,086 | |
Total other non-current assets | 5,494,591 | 1,645,436 |
18. Investments
Current | Non-current | ||||
2012 USD | 2011 USD | 2012 USD | 2011 USD | ||
Available-for-sale investments carried at fair value - mutual funds | 4,787,630 | - | - | - | |
Held-to-maturity investments carried at amortised cost | - | - | 964,281 | - | |
Total investments | 4,787,630 | - | 964,281 | - | |
The Group has investments amounting to USD 4,787,630 (2011: USD nil) in mutual fund units of Industrial Development Finance Corporation ("IDFC") which are quoted on the Indian stock markets. The Group has invested in 190,235 units of IDFC cash fund - Super Inst Plan C growth. The fair value of the quoted units is determined by reference to published data. Investments in mutual funds represent investments in growth funds with an average return of 8.75% (2011: none). During the year, disposals resulted in a gain of USD 815,356 (2011: USD 141,648) (note11).
The Group has investments amounting to USD 964,281 (2011: USD nil) in non-convertible debentures of India Infoline Limited. The carrying amounts disclosed above are maximum possible credit risk exposure in relation to these financial assets.
19. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current year. There were no deferred taxes in the prior year.
At 31 March 2011 | Recognisedin profit orloss | Recogniseddirectly inequity | Foreign Exchange USD | At 31 March 2012 | |
USD | USD | USD | USD | ||
Property, plant and equipment | - | (2,503,338) | - | 179,528 | (2,323,810) |
Provisions | - | 20,856 | - | (1,495) | 19,361 |
Share issue costs | - | - | 702,105 | (50,352) | 651,753 |
MAT credit | - | 159,221 | - | - | 159,221 |
Unrealised inter-group profits | - | 1,614,076 | - | (115,754) | 1,498,322 |
- | (709,185) | 702,105 | 11,927 | 4,847 | |
Tax losses | - | 2,238,473 | - | (160,533) | 2,077,940 |
Net deferred tax asset | - | 1,529,288 | 702,105 | (148,606) | 2,082,787 |
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
As at 31 March 2012 | As at31 March 2011 | ||
USD | USD | ||
Deferred tax assets | 4,406,597 | - | |
Deferred tax liabilities | (2,323,810) | - | |
Deferred tax asset, net | 2,082,787 | - |
20. Trade and other receivables
As at 31 March 2012 | As at31 March 2011 | ||
USD | USD | ||
Amounts receivable for the sale of electricity - Jodhpur Vidyut Vitran Nigam Limited | 1,434,874 | - | |
Amounts receivable for the sale of electricity - Gujarat Urja Vikas Nigam Limited | 344,255 | - | |
Accrued income | 4,928,516 | - | |
Other receivables | 348,749 | - | |
Trade and other receivables | 7,056,394 | - |
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost. Total trade receivables held by the Group at 31 March 2012 amounted to USD 1,779,129 (2011: USD nil) and are non-interest bearing receivables. Trade receivables are generally due within 30-60 days. During the year ended 31 March 2012, no trade receivables were collectively impaired or written off.
The Group does not hold any collateral or other credit enhancements over any of its trade receivables nor does it have the legal right of offset against any amounts owed by the Group to the counterparty.
Trade receivables include amounts which are past due at the reporting date but against which the Group has not recognised any allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still recoverable. The average age of the receivables was 75 days (2011: none)
The maximum exposure to credit risk at the reporting date is the carrying value of each customer mentioned above.
Ageing of past due but not impaired receivables is as follows:
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
31-60 days | 263,070 | - | |
61-90 days | 377,735 | - | |
90-180 days | 497,101 | - | |
Total | 1,137,906 | - |
The fair value of trade receivables approximates their carrying amounts largely due to the short-term maturities of these instruments hence management consider the carrying amount of trade and other receivables to be approximately equal to their fair value.
Accrued income represents amounts receivable from the customer but not billed for as at 31 March 2012.
21. Advances and other current assets
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Capital advances | 41,491,866 | 29,916,446 | |
Deposits | 112,890 | 75,984 | |
Accrued Interest | 71,424 | 163,443 | |
Prepayments and other advances | 1,773,681 | 854,725 | |
Total advances and other current assets | 43,449,861 | 31,010,598 |
Capital advances represent advance payments made to third parties for the construction of wind farm assets, as part of long-term construction service contracts.
Prepayments and other advances primarily relate to amounts paid in advance for lease rentals.
22. Cash and bank balances
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Bank balances |
1,937,945 | 1,311,617 | |
Bank deposits | 1,214,030 | 15,550,266 | |
Total cash and bank balances | 3,151,975 | 16,861,883 |
23. Borrowings
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Unsecured borrowings at amortised cost | |||
CCD liability | 29,536,738 | - | |
Other borrowings | 123,137,269 | - | |
Total borrowings | 152,674,007 | - |
Amounts due for settlement within 12 months - USD 2,281,959
Amounts due for settlement after 12 months - USD 150,392,048
During the period MEIL has drawn down the term loan facility with IDFC to finance the construction of wind farm assets. The carrying amount of the liability measured at amortised cost is USD 123,137,269 (2011: USD nil). In compliance with the terms of the loan agreement MEIL has created a charge on all project movable, immovable properties, cash flows, receivables and revenues in favour of IDFC. The effective interest rate on the term loan is 13.4%. The loan is for a period of 14 years and will be maturing on 15 September 2024.
During the year the Group issued 5,000,000 compulsory convertible debentures ("CCDs") at Rs. 300 (~ USD 6) each to IDFC including any of its affiliates (the "Investor") under an agreement between the Group and IDFC. The purpose of this is to fund the capital projects of the Group. The following are the significant terms in relation to the CCDs:
·; the CCDs carry a fixed rate of interest payable quarterly in arrears on the principal amount of the CCDs outstanding;
·; the CCDs, along with unpaid interest, if any, mandatorily convert into such number of equity shares of MEIL at the end of 48 months from the date of issue so as to provide the investor a stated rate of return;
·; the CCDs will be secured by collateral support in the form of pledge of Bindu Urja Capital Inc. (which Ravi Kailas controls) shareholding, certain non-disposal undertakings by the Company and an irrevocable and unconditional corporate guarantee by the Company to IDFC.
Further, the Group entered into an option agreement with IDFC on the same date whereby IDFC can put the CCDs (the "put option") or alternatively, the Group can call the CCDs (the "call option") in exchange for cash providing IDFC a stated rate of return. The call option can be exercised any time after 18 months from the date of issue whereas the put option can be exercised over a period beginning from 36 months to 48 months from the date of issue of CCDs.
Consistent with IAS 32, Financial Instruments: Presentation, and IAS 39Financial Instruments: Measurement, on initial recognition, the issue proceeds have been segregated in the financial statements. The issue proceeds ofUSD 32,661,428 (2011: USD nil) (net of issue costs of USD 388,848 (2011: USD nil)) were first attributed to the fair value of the options, amounting to USD 5,068 with the residual allocated to the financial liability amounting toUSD 32,656,360 (2011: USD nil), with the effective interest rate being 15.1%.
The options are subsequently measured at fair value through profit and loss, and the financial liability is subsequently measured at amortised cost. The period end balance of the options was USD 39,921 (2011: USD nil) and the CCD financial liability was USD 29,536,738 (2011: USD nil).
24. Trade and other payables
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Trade payables | 3,045,405 | 536,258 | |
Other payables | 156,179,079 | 6,579,261 | |
Total trade and other payables | 159,224,484 | 7,115,519 |
Trade creditors relate to amounts outstanding for trade purchases and ongoing costs.
Other payables include payables for purchase of fixed assets amounting to USD 153,601,045 (2011: USD 6,525,282).
The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
The fair value of trade and other payables approximates their carrying amounts largely due to the short-term maturities of these instruments hence management consider that the carrying amount of trade and other payables to be approximately equal to their fair value.
25. Employee benefits
Defined contribution plans
Provident fund:
The Group makes contributions to a defined contribution retirement benefit plan for qualifying employees. Under the scheme, the Group is required to contribute a specified percentage of the qualified employees' pay to fund the benefits. These contributions are made to a fund administered and managed by the Government of India. The Group's monthly contributions are charged to the consolidated income statement in the period they are incurred.
The total cost charged to income of USD 55,660 (2011: USD nil) represents contributions payable to these schemes by the Group at rates specified in the rules of the plan. As at 31 March 2012, contributions of USD 19,353 (2011: USD nil) were due in respect of the current reporting period had not been paid over to the scheme.
Defined benefit plans
(a) Gratuity
In accordance with the Payment of Gratuity Act 1972 of India, the Group provides for gratuity, a defined benefit retirement plan (the 'Gratuity Plan') covering eligible employees. The Group makes annual contributions under the Gratuity Plan to Life Insurance Corporation of India. No other post-retirement benefits are provided. The scheme is a funded scheme.
The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March 2012 by Mr K.V.Y Sastry, fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation, the related current service cost and past service cost was measured using the projected unit cost method.
The projected unit cost method is an accrued benefits valuation method in which the scheme liabilities make allowance for projected earnings. The accumulated benefit obligation (ABO) is an actuarial measure of the present value for service already rendered but differs from the projected unit cost method in that it includes no assumption for future salary increases. At the balance sheet date the gross ABO was USD 38,659 (2011: USD nil).
The valuation carried out at 31 March 2012 by an independent actuary was the first time the obligation under the gratuity plan had been measured as this was not material to the Group for the year ended 31 March 2011 due to the number of employees at this date.
(a) Gratuity (continued)
Movements in the present value of the benefit obligation were as follows:
Year ended 31 March 2012 USD | Year ended 31 March 2011 USD | ||
Change in benefit obligation | |||
Projected benefit obligation at the beginning of the year | - | - | |
Current service cost | 13,630 | - | |
Actuarial loss | 28,014 | - | |
Projected benefit obligation at the end of the year | 41,644 | - | |
Amount recognised in the consolidated statement of financial position | |||
Projected benefit obligation at the end of the year | 38,659 | - | |
Liability recognised in the consolidated statement of financial position | 38,659 | - | |
Cost of employee benefits for the year | |||
Current service cost | 13,630 | - | |
Net actuarial loss recognised in the year | 28,014 | - | |
Net cost recognised in the consolidated income statement | 41,644 | - |
Key assumptions used:
Year ended 31 March 2012
| Year ended 31 March 2011
| |
Discount rate (%) | 8.00% | - |
Long-term rate of compensation increase (%) | 7.00% | - |
Attrition (%) | 6.00% | - |
Mortality Table | LIC (1994 -96) - |
(b) Leave Encashment
The Group also provides for leave encashment (the "leave encashment plan"), a defined benefit plan covering eligible employees. Under the leave encashment plan, employees are entitled to future payments upon termination of service with the Company, whether it be by death during service or upon reaching retirement age.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 31 March 2012 by Mr K.V.Y Sastry, fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation and the related current service cost was measured using the projected unit credit method.
The projected unit cost method is an accrued benefits valuation method in which the scheme liabilities make allowance for projected earnings. The accumulated benefit obligation (ABO) is an actuarial measure of the present value for service already rendered but differs from the projected unit credit method in that it includes no assumption for future salary increases. At the balance sheet date the ABO was USD 27,302 (2011: USD nil).
The valuation carried out at 31 March 2012 by an independent actuarial valuation was the first time the obligation under the leave encashment had been measured as this was not material to the Group for the year ended 31 March 2011 due to the number of employees at this date.
(b) Leave Encashment (continued)
Movements in the present value of the benefit obligation were as follows:
Year ended 31 March 2012 USD | Year ended 31 March 2011 USD | ||
Change in benefit obligation | |||
Projected benefit obligation at the beginning of the year | - | - | |
Current service cost | 8,136 | - | |
Actuarial loss | 20,551 | - | |
Projected benefit obligation at the end of the year | 28,687 | - | |
Amount recognised in the consolidated statement of financial position | |||
Projected benefit obligation at the end of the year | 27,302 | - | |
Fair value of plan assets at the end of the year | - | - | |
Liability recognised in the consolidated statement of financial position | 27,302 | - | |
Cost of employee benefits for the year | |||
Current service cost | 8,136 | - | |
Net actuarial loss recognised in the year | 20,551 | - | |
Net cost recognised in the Income Statement | 28,687 | - |
Key assumptions used:
Year ended 31 March 2012
| Year ended 31 March 2011
| |
Actuarial assumptions for long-term compensated absences | ||
Discount rate | 8.00% | - |
Mortality table | LIC (1994-96) | - |
Salary escalation | 7.00% | - |
Attrition | 6.00% | - |
26. Compulsory convertible preference shares
During the year the Group has issued 11,666,566 Series A CCPS at Rs.300 (~USD 6) each to IIF under an Investment Agreement between the Group, IIF and Mr Ravi Kailas. The following are the salient features of the CCPS:
·; IIF is entitled to receive a preference dividend before any dividends are declared to the ordinary shareholders. These carry a step-up dividend which is cumulative.
·; The Company entered into an option agreement with IIF on the same date whereby the Company can call the CCPS (the "call option") or alternatively, IIF can put the CCPS (the "put option") in exchange for cash providing IIF a stated rate of return. The call option can be exercised at any time after four years three months and the put option can be exercised at any time after five years three months from the date of issue.
·; The CCPS convert into equity shares of MEIL at a fixed price of Rs.300 (~USD 6) per share, for a fixed number of shares, at the end of six years if the call and put options are not exercised by either of the parties.
·; As part of the investment agreement, IIF were issued with 100 ordinary shares in MEIL (see note 30).
In accordance with IAS 32, Financial Instruments: Presentation and IAS 39Financial Instruments: Measurement, upon initial recognition, the issue proceeds has been segregated in the financial statements.
The issue proceeds of USD 69,932,181 (net of issue costs of USD 1,891,056) were first attributed to the embedded derivatives, with the fair value of the options amounting to USD 2,670,325. As the instrument entitles the holder to a fixed number of shares the remaining value of the proceeds are bifurcated such that there is a liability component and an equity component. The liability component, being USD 12,184,583 was estimated by discounting the mandatory preference share dividend of six year cash flows using an interest rate from an equivalent instrument without a conversion feature, with the residual value of USD 55,077,273 representing equity. The effective interest rate on the financial liability is 5.6%.
The options are subsequently measured at fair value for profit and loss, and the financial liability is subsequently measured at amortised cost. The period end balance of the options was USD 2,819,558 (see consolidated statement of financial position), for the liability component of the preference shares was USD 11,435,270 and for the equity component of the CCPS was USD 55,395,172 (see note 30).
27. Share capital
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Issued and fully paid up share capital of the Company | |||
163,636,000 ordinary shares with no par value | 72,858,278 | 72,858,278 |
After its incorporation on 13 August 2010 MEL acquired 119,999,999 shares in BVML, from its existing shareholders namely, Esrano Overseas Ltd, Bindu Urja Investments Inc. (formerly Mytrah Energy Investments Inc.), Bindu Urja Holding Inc. (formerly Mytrah Energy Holdings Inc.), Bindu Urja Capital Inc. (Mytrah Energy Capital Inc.), and Sila Energy Inc. In consideration of the said transfer the Company issued shares of the Company at no par value in its capital. Subsequently the Company issued 43,636,000 shares of no par value through listing of its shares on AIM.
The issued share capital refers to ordinary share capital, which carries voting rights with entitlement to an equal share in dividends authorised by the board and in the distribution of the surplus assets of the Company.
28. Retained earnings
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Balance at beginning of the year | (1,750,465) | (175,062) | |
Loss for the year from continuing operations | (2,832,599) | (1,575,403) | |
Balance at end of the year | (4,583,064) | (1,750,465) |
29. Other reserves
(a) Equity-settled employee benefits reserve:
The equity-settled employee benefits reserve relates to the share options granted to employees under the employee share option plan. Further information about share-based payments is set out in note 34.
As at 31 March2012 | As at 31 March2011 | ||
USD | USD | ||
Balance at beginning of the year | 169,772 | - | |
Arising on share-based payments | 688,047 | 169,772 | |
Balance at end of the year | 857,819 | 169,772 |
(b) Foreign currency translation reserve
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Balance at beginning of the year | (933,080) | (3,752) | |
Exchange differences arising on translating the net assets of foreign operations | (12,021,898) | (929,328) | |
Balance at end of the year | (12,954,978) | (933,080) |
Exchange differences relate to the translation of the net assets of the Group's foreign operations which relate to subsidiaries, from their functional currency into the Group's presentational currency being USD.
(c) Fair valuation reserve
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Balance at beginning of the year | - | - | |
Fair valuation reserve on available-for-sale financial assets | 31,656 | - | |
Balance at end of the year | 31,656 | - |
30. Non-controlling interest
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Balance at beginning of the year | - | - | |
Share of profit for the year | - | - | |
Non-controlling interest arising through issue of CCPS by MEIL (note 26) | 57,937,332 | - | |
Share issue costs | (1,891,056) | ||
Deferred tax on share issue costs (note 19) | (651,753) | ||
Non-controlling interest arising through issue of 100 ordinary shares by MEIL to IIF (note 26) | 649 | - | |
Balance at the end of the year | 55,395,172 | - |
31. Commitments
(a) Capital commitments
As at 31 March 2012 | As at31 March 2011 | ||
USD | USD | ||
Capital commitments | 63,851,182 | 82,879,765 |
The capital expenditures authorised and contracted relate to the provision of wind farm assets, which have not been provided for in the accounts. This is net of advances paid of USD 41,491,866 (2011: USD 29,916,446) (see note 21).
(b) Operating leases
The Group leases office premises under non-cancellable operating lease agreements with a term of three years. The lease arrangement contains a renewal clause providing the Company with the option of extending the lease for a further period of three years and four years at the prevailing market rates.
Total operating lease expense recognised in the consolidated income statement as administrative expenses was USD 540,039 (2011: USD 172,972).
Minimum lease payments
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
As at 31 March 2012 | As at 31 March 2011 | ||
USD | USD | ||
Within 1 year | 52,821 | 86,869 | |
Later than 1 year and within 5 years | - | 92,081 | |
Total future minimum lease payments | 52,821 | 178,950 |
32. Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through its optimisation of the debt and equity balance.
The capital structure of the Group consists of net debt, which includes the borrowings disclosed in note 23 after deducting cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes below.
The Group's risk management committee reviews the capital structure on a semi-annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital.
The gearing ratio at the year end is as follows:
As at 31 March 2012 | |
USD | |
Debt (note 23) | 152,674,007 |
Cash and cash equivalents (note 22) | (3,151,975) |
Net Debt | 149,522,032 |
Equity | 111,604,883 |
Equity and net debt | 261,126,915 |
Net debt to equity ratio | 57% |
In the prior year the Group was fully funded by equity. Debt is defined as long and short-term borrowings (excluding derivatives) as detailed in note 23. Equity includes all capital and reserves of the Group that are managed as capital.
Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the basis for recognition of income and expenses) for each class of financial asset, financial liability and equity instrument are disclosedin note 3.
Categories of financial instruments
The accounting classification of each category of financial instruments and their carrying amounts has been tabulated below:
Carrying amount as at 31 March 2012 | Fair values as at31 March 2012 | Carrying amount as at 31 March 2011 | Fair values as at31 March 2011 | |
USD | USD | USD | USD | |
Financial assets | ||||
Loans and receivables (including cash and bank balances) | ||||
Cash and short-term deposits (note 22) | 3,151,975 | 3,151,975 | 16,861,883 | 16,861,883 |
Current loans and receivables | 5,112,830 | 5,112,830 | 239,427 | 239,427 |
Non-current loans and other receivables (note 17) | 414,771 | 414,771 | 205,350 | 205,350 |
Current trade and other receivables | 1,779,129 | 1,779,129 | - | - |
Available-for-sale investment (note 18) | 4,787,630 | 4,787,630 | - | - |
Held to maturity financial assets (note 18) | 964,281 | 964,281 | - | - |
Total financial assets | 16,210,616 | 16,210,616 | 17,306,660 | 17,306,660 |
Financial liabilities | ||||
Amortised costs | ||||
Long-term loans | 121,799,532 | 121,799,532 | - | - |
Short-term loans | 1,337,737 | 1,337,737 | - | - |
Liability component of CCPS | 11,435,270 | 11,435,270 | - | - |
Liability component of CCD | 29,536,738 | 29,536,738 | - | - |
Current trade and other payables | 3,045,405 | 3,045,405 | 7,115,519 | 7,115,519 |
Fair value | ||||
Derivative instruments not designated as hedge | 2,779,637 | 2,779,637 | - | - |
Total financial liabilities | 169,934,319 | 169,934,319 | 7,115,519 | 7,115,519 |
The fair value of the financial assets and liabilities are estimated 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 fair value of the financial instruments approximates their carrying amounts largely due to the short-term maturities or nature of these instruments.
Capital management policies
The group's objective when managing capital is to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders. The group also proposes to maintain an optimal capital structure to reduce the cost of capital. Hence, the group may adjust any dividend payments, return capital to shareholders or issue new shares. Total capital is the equity as shown in the consolidated statement of financial position. Currently, the group primarily monitors its capital structure in terms of evaluating the funding of wind farm projects. Management is continuously evolving strategies to optimise the returns and reduce the risks. It includes plans to optimise the financial leverage of the group.
Equity comprises all components of equity and includes the equity component of CCPS.
(i) Currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The Group's presentation currency is the US dollar. The Group's exposure to foreign currency arises in part when the Group Company holds financial assets and liabilities denominated in a currency different from the functional currency of the entity. Based on the current profile of the Group, the net liability held in foreign currency is USD 38,251 (2011: USD nil), and as such the Group's exposure to currency risk is limited.
(ii) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk on its cash and bank balances. Cash and bank balances (short-term bank deposits) expose the company to cash flow interest rate risk. However, the Group does not carry any fixed interest bearing financial liabilities that are designated at fair value through profit or loss except for the derivative financial instruments embedded in the CCPS and CCDs. Hence, the Group is exposed to the fair value interest rate risk on such derivative financial instruments.
The average interest rate on short-term bank deposits during the year was 9.71% (2011: 7.1%).
Interest rate risk management
The primary goal of the Group's investment strategy is to ensure risk free returns are earned on surplus funds. Market price risk arises from cash and bank balances held by the Group. The Group monitors its investment portfolio based on market expectations and creditworthiness. Material investments within the portfolio are managed on an individual basis.
The Group's exposure to interest rates on financial instruments is detailed below:
As at 31 March2012 | As at 31 March2011 | |
USD | USD | |
Variable interest rate financial assets | ||
Cash and bank balances (maturities of less than one month) | 3,151,975 | 16,861,883 |
Total variable interest rate financial assets | 3,151,975 | 16,861,883 |
The amounts included above for variable interest rate financial assets are subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the reporting date.
If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Group's total comprehensive income for the year would increase/decrease by USD 7,649. (2011: USD 9,998).
As at 31 March 2012, if interest rate on INR denominated borrowings had been 100 basis points higher/lower with all other variables held constant, post tax income for the year would have been USD 43,870 (2011: USD nil) lower/higher.
(iii) Price risk
The Group is exposed to mutual funds price (net asset value - 'NAV') risk because of investments in debt-based mutual fund units held by the Group and classified on the statement of financial position as available-for-sale financial assets. The Group is not exposed to any commodity price risk. In order to manage its price risk arising from investment in mutual fund units, the Group diversifies its portfolio; in accordance with the limits set by the Group risk management policies.
As the Group invests in mutual fund units which in turn invest in short-term (in the range 30-90 days) debt instruments with low yield and hence carry a very minimal mark-to-market risk. Moreover, the accruals earned by the said units are distributed on a daily basis; which mainly represents the interest accruals rather than the fair value movements. Hence, any reasonable movement in interest yields are not expected to have any impact on the NAV of the said units.
(iv) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Details of additional undrawn facilities that the Group has at its disposal to reduce further liquidity risk are set out below.
The following table details the Group's remaining contractual maturity for its financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
Not later than 1 month | 1 to 3 months | 3 months to 1 year | 1 year to 5 years | Later than 5 years | Total | |
USD | USD | USD | USD | USD | USD | |
Financial liabilities - amortised cost | ||||||
Borrowings | - | - | 1,337,738 | 31,537,266 | 90,262,265 | 123,137,269 |
Trade and other payables | - | 3,045,405 | - | - | - | 3,045,405 |
Liability component of CCPS and CCD liability | - | - | 944,222 | - | 40,027,786 | 40,972,008 |
Financial liabilities - fair value through profit or loss | ||||||
Derivative instruments not designated as hedge | - | - | - | - | 2,779,637 | 2,779,637 |
Total financial liabilities | - | 3,045,405 | 2,281,960 | 31,537,266 | 133,069,688 | 169,934,319 |
The Group has access to financing facilities as described below, of which USD 130,003,587 were unused at the balance sheet date (2011: USD 100,000,000). The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.
As at 31 March2012 | As at 31 March2011 | |
USD | USD | |
Unsecured bank facility - maturing 15 September 2024 | ||
Amount used | 126,688,042 | - |
Amount unused | 130,003,587 | 100,000,000 |
Total unsecured bank facility | 256,691,629 | 100,000,000 |
(v) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The group's credit risk arises from accounts receivable balances on sale of electricity. The Indian entities have entered into purchase power agreements with transmission companies incorporated by the Indian State Government and other electricity transmission and trading companies to export the electricity generated. The group is therefore committed to sell power to these customers and regards any potential risk of default as being predominantly a governmental one. The group is paid monthly by the transmission companies for the electricity it supplies. The group assesses the credit quality of the purchaser based on its financial position and other information.
Financial assets that potentially expose the Company to credit risk consist principally of cash and bank balances, which are held with institutions with a minimum credit rating of AA. The fair value of financial assets represents the maximum credit exposure.
Fair value estimation
IFRS 7, Financial Instruments: Disclosures, requires entities to classify fair value measurements for financial instruments measured at fair value in the statement of financial position, using a three level fair value hierarchy that reflects the significance of inputs used in the measurements. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 7 are described below:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
The following table sets forth the financial liabilities, measured at fair value, by level within the fair value hierarchy as at 31 March 2012:
Level 1 | Level 2 | Level 3 | Total | |
Liabilities | ||||
Derivative financial instruments not designated as hedge | - |
2,779,637 | - |
2,779,637 |
There were no financial liabilities, measured at fair value, by level within the fair value hierarchy as at 31 March 2011.
33. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
The Directors of the Company who are also considered to be the key management personnel are:
1. Hon Angad Paul | - Chairman (until 18 Aug 2011and retired on 10 February 2012) |
2. Mr Ravi Kailas | - CEO, Managing Director and Chairman (from 18 August 2011) |
3. Mr Vikram Kailas | - Chief Financial Officer and Director |
4. Mr Rohit Phansalkar | - Non-Executive Director |
5. Mr Alastair Cade | - Executive Director |
6. Mr Charles Edmund Wilkinson | - Non-Executive Director (retired 4 November 2011) |
7. Mr Philip Swatman | - Non-Executive Director |
8. Mr Peter Neville | - Non-Executive Director (from 4 November 2011) |
9. Mr Russell Walls | - Non-Executive Director (from 4 November 2011) |
The entitieswhere certain key management personnel have significant influence are:
1. Mytrah Engineering (India) Limited | - Hon Angad Paul |
2. Zip Reality Private Limited | - Mr Ravi Kailas |
3. Bindu Urja Holding Inc. | - Mr Ravi Kailas |
4. Bindu Urja Investments Inc. | - Mr Ravi Kailas |
5. Bindu Urja Inc. | - Mr Ravi Kailas |
6. Esrano Overseas Limited | - Hon Angad Paul |
7. RKP Capital Inc. | - Mr Rohit Phansalkar |
8. Chakas Investments UK Limited | - Mr Alastair Cade |
9. Sila Energy Inc. | - Mr Ravi Kailas |
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Advisory services fees to RKP Capital Inc. | 69,838 | 55,318 | |
Reimbursement of expenses to Chakas Investments UK Limited | 42,546 | 71,458 | |
Reimbursement of expenses to Sila Energy Inc. | - | 12,090 | |
|
|
The following balances were outstanding at the end of the reporting period:
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Payable to Chakas Investments UK Limited | 8,000 | 13,486 | |
Payable to Sila Energy | - | 11,940 | |
|
|
Remuneration of key management personnel:
The remuneration of Directors, who are the key management personnel of the Group, is set out below for each of the categories specified in IAS 24 Related Party Disclosures.
Year ended 31 March 2012 | Year ended 31 March 2011 | ||
USD | USD | ||
Short-term employee benefits | 1,022,043 | 551,178 | |
Share-based payments | 688,047 | 169,772 | |
|
| ||
Total remuneration of key management personnel | 1,710,090 | 720,950 | |
|
|
As per the CCPS investment agreement (note 26), for a period of one year from the completion date or commissioning of a cumulative 400 MW capacity, whichever is later, Mr Ravi Kailas without prior consent of IIF shall not sell or dispose, directly or indirectly his shareholding in Mytrah Energy Limited.
The Directors do not consider that there were any other related party transactions that have not been disclosed in these financial statements.
34. Share-based payments
The Company has an equity-settled share option scheme for certain Directors of the Company and employees in the Group. All options have a vesting period of three years. Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of the expiry. Options lapse if the employee leaves the Company before the options vest. Details of the share options outstanding during the period are as follows.
Year ended 31 March | 2012 | 2011 | ||
Number of share options | Weighted average exercise price | Number of share options | Weighted average exercise price | |
(GBP) | (GBP) | |||
Outstanding at beginning of period | 4,877,400 | 1.15 | - | - |
Granted during the period | 9,831,289 | 1.14 | 4,877,400 | 1.15 |
|
|
|
| |
Outstanding at the end of the period | 14,708,689 | 1.14 | 4,877,400 | 1.15 |
|
|
|
|
There were no share options forfeited, exercised, or expired during the years ended 31 March 2012 or 2011. There were no share options exercisable at 31 March 2012, or 2011. The options outstanding at 31 March 2012 had a weighted average exercise price of GBP 1.14, and a weighted average remaining contractual life of 9 years. Details of the share options granted during the year are as follows:
Director/Employees | Shares granted during the period | Grant date | Expiry date | Exercise price (GBP) | Fair valueat grant date (GBP) |
Russell Walls | 38,700 | 20.10.2011 | 19.10.2021 | 0.95 | 0.95 |
Peter Neville | 38,700 | 05.10.2011 | 04.10.2021 | 0.95 | 0.95 |
Ravi Kailas | 9,090,889 | 23.12.2011 | 22.12.2021 | 1.15 | 0.93 |
Employees within the Group | 663,000 | 01.03.2012 | 28.02.2015 | 0.94 | 0.94 |
The aggregate fair value of the share options granted during the year was USD 2,787,207.
Weighted average share price (GBP) | 1.01 | |
Weighted average exercise price (GBP) | 1.14 | |
Expected volatility | 36.20% | |
Expected life | 3 years | |
Risk-free interest rate | 0.72% | |
Expected volatility was determined by calculating the historical volatility of the Group's share price from the date of listing on 12 October 2010 to the reporting date of 31 March 2012. The expected life use in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The Group recognised total expenses of USD 688,047 (2011: USD 169,772) related to equity-settled share-based payment transactions in the current year.
35. Contingent liabilities
The Group has provided bank guarantees. Where there are such arrangements they are considered to be insurance arrangements and accounts for them as such. Guarantees are treated as contingent liabilities until such a time as it becomes probable that the company will be required to make a payment under the guarantee.
36. Subsidiaries
A list of investments in subsidiaries is provided in note 1.
37. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party as there is a relationship agreement between the Company and the Controlling Shareholders (namely Bindu Urja Investments Inc., Bindu Urja Holdings Inc., Bindu Urja Capital Inc., Mr Ravi Kailas, Sila Energy Limited and Esrano Overseas Limited and Mr Angad Paul) whereby those shareholders undertake to the Company not to exercise their voting rights to take control of the board of the Company and to conduct all transactions and relationships between them (and any of their associates or certain parties) and the Company on terms which allow the Company to carry on its business independently, at arm's length and on a normal commercial basis.