CORPORATE STATUTORY FINANCIAL

OVERVIEW REPORTS STATEMENTS

Notes to Financial Statements

For The Year Ended 31st March, 2017

Note No. 1 - General Information: 1st April, 2016. Accordingly, the Company
a) JSW Energy Limited (the Company), is a has prepared these Financial Statements
public limited Company domiciled in India and which comprise the Balance Sheet as at 31st
is incorporated under the provisions of the March, 2017, the Statement of Profit and
Companies Act applicable in India. Its shares are Loss, the Statement of Cash Flows and the
listed on two recognised stock exchanges in India. Statement of Changes in Equity for the year
The registered office of the Company is located at ended 31st March, 2017, and a summary of
JSW Centre Bandra Kurla Complex, Bandra East, the significant accounting policies and other
Mumbai - 400 051. explanatory information (together hereinafter
referred to as “Financial Statements”. The
b) The Company is primarily engaged in the business figures for the previous year ended 31st
of generation of power, project management March, 2016 and Opening Balance Sheet as
consultancy, operation & maintenance of power on 1st April, 2015 have also been reinstated
plants. by the Management as per the requirements
of Ind AS.
Note No. 2 - Statement of compliance:
a) The financial statements have been prepared in ii) The financial statements of the Company
accordance with Indian Accounting Standards are prepared in accordance with the Indian
(‘Ind AS’) notified under the Companies (Indian Generally Accepted Accounting Principles
Accounting Standards) Rules, 2015 as amended (GAAP) on the accrual basis of accounting
by the Companies (Indian Accounting Standards) and historical cost convention except for
(Amendment) Rules, 2016. certain material items that have been
measured at fair value as required by the
b) Upto the year ended 31st March, 2016, the relevant Ind AS and explained in the ensuing
Company prepared its financial statements in policies below.
accordance with the requirements of previous
GAAP prescribed under Section 133 of the iii) The financial statements are presented
Companies Act, 2013 (‘the Act’) read with Rule 7 of in Indian Rupees (‘INR’) and all values
the Companies (Accounts) Rules, 2014. These are are rounded to the nearest crore, except
the Company’s first Ind AS financial statements. otherwise indicated.
The date of transition to Ind AS is 1st April,
2015. Refer Note 43 for the details of significant b) Use of estimates and judgements
first-time adoption exemptions availed by the i) The preparation of the financial statements
Company and an explanation of how the transition requires that the Management to make
from previous GAAP to Ind AS has affected the estimates and assumptions that affect the
Company’s financial position, performance and reported amounts of assets and liabilities,
cash flows. disclosure of contingent liabilities as at the
date of the financial statements and the
Note No. 3 - Significant accounting policies: reported amounts of revenue and expenses
a) Basis of preparation of financial statements during the reporting period. The recognition,
i) In accordance with the notification issued measurement, classification or disclosure
by the Ministry of Corporate Affairs, the of an item or information in the financial
Company is required to prepare its Financial statements is made relying on these
Statements as per the Indian Accounting estimates.
Standards (‘Ind AS’) prescribed under Section
133 of the Companies Act, 2013 read with ii) The estimates and judgements used in the
rule 3 of the Companies (Indian Accounting preparation of the financial statements are
Standards) Rules, 2015 as amended by continuously evaluated by the Company
the Companies (Accounting Standards) and are based on historical experience
Amendment Rules, 2016 with effect from and various other assumptions and factors

1
 CORPORATE STATUTORY FINANCIAL
OVERVIEW REPORTS STATEMENTS

Notes to Financial Statements

For The Year Ended 31st March, 2017

considered for deriving basic earnings per share b) a present obligation that arises from
and the weighted average number of equity shares past events but is not recognized
which could have been issued on the conversion because:
of all dilutive potential equity shares. Potential
equity shares are deemed to be dilutive only if i) it is not probable that an outflow
their conversion to equity shares would decrease of resources embodying economic
the net profit per share from continuing ordinary benefits will be required to settle
operations. Potential dilutive equity shares are the obligation; or
deemed to be converted as at the beginning of the
period, unless they have been issued at a later ii) the amount of the obligation
date. cannot be measured with sufficient
reliability.
p) Provisions, contingencies and commitments
i) Provisions are recognised when the v) A contingent asset is a possible asset that
Company has a present obligation (legal arises from past events and whose existence
or constructive) as a result of a past event, will be confirmed only by the occurrence or
and it is probable that the Company will non-occurrence of one or more uncertain
be required to settle the obligation, and a future events not wholly within the control of
reliable estimate can be made of the amount the entity.
of the obligation.
vi) Commitments include the amount of
ii) The amount recognised as a provision is the purchase order (net of advances) issued to
best estimate of the consideration required to parties for completion of assets.
settle the present obligation at the end of the
reporting period, taking into account the risks vii) Provisions, contingent liabilities, contingent
and uncertainties surrounding the obligation. assets and commitments are reviewed at
When a provision is measured using the each reporting period.
cash flows estimated to settle the present
obligation, its carrying amount is the present viii) Provisions for onerous contracts are
value of those cash flows (when the effect of recognized when the expected benefits to be
the time value of money is material). derived by the Company from a contract are
lower than the unavoidable costs of meeting
iii) When some or all of the economic benefits the future obligations under the contract.
required to settle a provision are expected to
be recovered from a third party, a receivable q) Financial instruments
is recognised as asset if it is virtually certain Financial assets and financial liabilities are
that reimbursement will be received and the recognised when Company becomes a party to the
amount of the receivable can be measured contractual provisions of the instruments.
reliably.
Financial assets and financial liabilities are initially
iv) A disclosure for contingent liabilities is made measured at fair value. Transaction costs that are
where there is- directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than
a) a possible obligation that arises from financial assets and financial liabilities at fair value
past events and whose existence will through profit or loss) are added to or deducted
be confirmed only by the occurrence from the fair value of the financial assets or financial
or non-occurrence of one or more liabilities, as appropriate, on initial recognition.
uncertain future events not wholly Transaction costs directly attributable to the
within the control of the entity; or acquisition of financial assets or financial liabilities
at fair value through profit or loss are recognised
immediately in Statement of Profit and Loss.

2
JSW ENERGY LIMITED NAVIGATING CHALLENGES PROTECTING VALUE

Notes to Financial Statements

For The Year Ended 31st March, 2017

Financial assets the contractual terms of the instrument give

Financial assets are recognised when the rise on specified dates to cash flows that are
Company becomes a party to the contractual solely payments of principal and interest on
provisions of the instruments. Financial assets the principal amount outstanding.
other than trade receivables are initially
recognised at fair value plus transaction costs Interest income is recognised in Statement of
for all financial assets not carried at fair value Profit and Loss for FVTOCI debt instruments. For
through profit or loss. Financial assets carried the purposes of recognising foreign exchange
at fair value through profit or loss are initially gains and losses, FVTOCI debt instruments are
recognised at fair value, and transaction costs are treated as financial assets measured at amortised
expensed in the Statement of Profit and Loss. cost. Thus, the exchange differences on the
amortised cost are recognised in Satement of
Subsequent measurement Profit and Loss and other changes in the fair value
Financial assets, other than equity instruments, of FVTOCI financial assets are recognised in other
are subsequently measured at amortised cost, fair comprehensive income and accumulated under
value through other comprehensive income or fair the heading of ‘Reserve for debt instruments
value through profit or loss on the basis of both: through other comprehensive income’. When the
investment is disposed of, the cumulative gain
(a) the entity’s business model for managing the or loss previously accumulated in this reserve is
financial assets and reclassified to Statement of Profit and Loss.

(b) the contractual cash flow characteristics of All other financial assets are subsequently
the financial asset. measured at fair value.

Classification of financial assets Effective interest method

Debt instruments that meet the following The effective interest method is a method
conditions are subsequently measured at of calculating the amortised cost of a debt
amortised cost (except for debt instruments that instrument and of allocating interest income over
are designated at fair value through profit or loss the relevant period. The effective interest rate is
on initial recognition): the rate that exactly discounts estimated future
cash receipts (including all fees paid or received
the asset is held within a business model that form an integral part of the effective interest
whose objective is to hold assets in order to rate, transaction costs and other premiums or
collect contractual cash flows; and discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter
the contractual terms of the instrument give period, to the net carrying amount on initial
rise on specified dates to cash flows that are recognition.
solely payments of principal and interest on
the principal amount outstanding. Income is recognised on an effective interest basis
for debt instruments other than those financial
Debt instruments that meet the following assets classified as at FVTPL. Interest income is
conditions are subsequently measured at fair recognised in Statement of Profit and Loss and is
value through other comprehensive income included in the “Other income” line item.
(except for debt instruments that are designated
as fair value through profit or loss on initial Investments in equity instruments at FVTOCI
recognition) On initial recognition, the Company can make
an irrevocable election (on an instrument-by-
the asset is held within a business model instrument basis) to present the subsequent
whose objective is achieved both by collecting changes in fair value in other comprehensive
contractual cash flows and selling financial income pertaining to investments in equity
assets; and

3 ANNUAL REPORT 2016-17

JSW ENERGY LIMITED NAVIGATING CHALLENGES PROTECTING VALUE

Notes to Financial Statements

For The Year Ended 31st March, 2017

Note No. 39 - Capital management & Risk Management Strategies:

i) Capital management
The Company being in a capital intensive industry, its objective is to maintain a strong credit rating healthy
capital ratios and establish a capital structure that would maximise the return to stakeholders through
optimum mix of debt and equity.

The Company’s capital requirement is mainly to fund its capacity expansion, repayment of principal and
interest on its borrowings and strategic acquisitions. The principal source of funding of the Company has
been, and is expected to continue to be, cash generated from its operations supplemented by funding from
bank borrowings and the capital markets. The Company is not subject to any externally imposed capital
requirements.

The Company regularly considers other financing and refinancing opportunities to diversify its debt profile,
reduce interest cost and align maturity profile of its debt commensurate with life of the asset and closely
monitors its judicious allocation amongst competing capital expansion projects and strategic acquisitions, to
capture market opportunities at minimum risk.

Gearing ratio
The Company monitors its capital using gearing ratio, which is net debt divided to total equity as given below:

` crore
Particulars As at As at As at
31st March, 2017 31st March, 2016 1st April, 2015
Debt @ 4,152.06 6,298.16 5,932.85
Cash and bank balances (including current investment in
liquid mutual fund held for sale) 348.16 215.74 874.15
Net debt 3,803.90 6,082.42 5,058.70
Total equity 7,615.73 9,431.75 8,428.33
Net debt to equity ratio 0.54 0.37 0.41

@ Debt is defined as long-term and short-term borrowings (excluding derivative and contingent consideration).

ii) Financial risk management objectives

The Company’s Corporate Treasury function provides services to the business, co-ordinates access to
domestic and international financial markets, monitors and manages the financial risks relating to the
operations of the Company. These risks include market risk (including currency risk, interest rate risk and
other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge
risk exposures, wherever required. The use of financial derivatives is governed by the Company’s policies
approved by the Board of Directors, which provide written principles on foreign exchange and commodity
price risk management, the use of financial derivatives and non-derivative financial instruments, and the
investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal
auditors on a continuous basis. The Company does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.

Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to
exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters
utilizing forward foreign exchange contracts and currency options.

4 ANNUAL REPORT 2016-17

 CORPORATE STATUTORY FINANCIAL
OVERVIEW REPORTS STATEMENTS

Notes to Financial Statements

For The Year Ended 31st March, 2017

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary
liabilities at the end of the reporting period were as follows:

Particulars USD EURO ZAR GBP INR

(millions) (millions) (millions) (millions) (Crore)
As at 31st March, 2017
A. Financial Liabilities
Current liabilities
Acceptances (Buyers credit) 267.46 - - - 1,357.27
Trade payables - Other than acceptances 27.62 - - - 175.41
Interest on buyers credit 0.46 - - - 5.36
Total financial liabilities - (A) 295.54 - - - 1,538.04
B. Financial Assets
Non-current assets
Loan and advances 48.63 - - - 485.67
Interest on loan 2.48 - - - 14.38
Investment in equity 8.71 - - - 39.27
Current assets
Other advances 0.08 - - - 0.18
Total financial assets - (B) 59.9 - - - 539.90
Excess of financial liabilities over financial assets (A-B) 235.64 - - - 998.14
As at 31st March, 2016
A. Financial Liabilities
Current liabilities
Acceptances (Buyers credit) 286.82 - - - 1,682.28
Trade payables - Other than acceptances 41.82 - - - 305.27
Interest on buyers credit 0.78 - - - 5.37
Total financial liabilities - (A) 329.42 - - - 1,992.92
B. Financial Assets
Non-current assets
Loan and advances 52.68 - - - 385.72
Interest on loan 1.38 - - - 8.22
Investment in equity 8.71 - - - 43.87
Current assets
Other advances 1.38 - - *0.00 7.28
Total financial assets - (B) 64.15 - - *0.00 437.81
Excess of financial liabilities over financial assets (A-B) 265.27 - - *(0.00) 1,555.11
As at 1st April, 2015
A. Financial Liabilities
Current liabilities
Acceptances (Buyers credit) 179.82 - - - 1,378.39
Trade payables - Other than acceptances 20.97 - - - 143.28
Interest on buyers credit 0.88 - - - 1.88
Total financial liabilities - (A) 201.67 - - - 1,523.55
B. Financial Assets
Non-current assets
Loan and advances 55.38 - - - 378.24
Interest on loan 0.87 - - - 5.38
Investment in equity 9.77 - - - 51.17
Current assets
Other advances 0.18 0.06 0.68 - 1.18
Total financial assets - (B) 66.20 0.06 0.68 - 435.97
Excess of financial liabilities over financial assets (A-B) 135.47 (0.06) (0.68) - 1,087.58