Karma Energy Ltd Management Discussions.


General Economy

The global economy has been reeling under global pandemic caused by COVID-19. The pandemic being global has crippled the economy of every country whether developed or developing. World over there has been national lockdown in respective countries of varying duration based on the extent of crisis caused by the pandemic. Entire trade movement within countries and across globe came to a standstill. As far as India is concerned, the Central Government imposed national lockdown in last week of March 2020 and the same has been extended time to time with slow relaxation since mid-May 2020 with a number of strings attached. Post relaxation the number of people affected and the unfortunate death quantum jumped leading to selective strict lockdowns in different states, districts, wards to a varying extent and duration causing continuous disruption to normal life trying to limp back. The Governments, Regulatory bodies like RBI too different measures to mitigate the negative effect of the virus, revive growth and preserve financial stability. Time frame for compliances were extended from time to time. The survey by RBI in April 2020 stated that real GDP growth FY 2019-20 is 5% and 2020-21 was pegged at 5.5%. Within two months all turned topsy-turvey and in June RBI projected a GDP growth for 2020-21 at a negative of 1.5%.

Company Business

The performance of the Company as far as power generation is concerned was largely steady with varying wind availability in different sites where the windmills are in operation and has virtually no effect due to pandemic. However in like every renewable energy entity in the country the company had to grapple with adverse regulatory changes. The performance of the Company is directly linked to the Renewable Energy Policies of both Centre and State Governments, effectiveness of Nodal Agencies and laying down of encouraging policies and implementation thereof by State Electricity Regulatory Commissions.

In Andhra Pradesh, though company has been generating power from its 7.5 MW, it continues to be hard pressed in realization of the generation dues with about Rs.3.80 crore for the period January 2011 to May 2014 pending to be received due to the imbroglio created by the state bifurcation and judicial authorities including the high courts not imparting a fair justice and consequently the matter is still lingering in the legal circles.

In part of the project where the PPA for 6 MW have been renewed after protracted 2 to 3 years of discussions and litigations, despite PPA having being signed around September 2018, the funds have been received only in July 2020 ie after 4-5 years. Still PPA for a 1.5 MW is yet to be finalized and plant stands disconnected.

In Tamil Nadu, for no valid reasons payments have been delayed for more than 24 months. However by offering certain discount the Company realized major dues till December 2019 in April 2020.

In Maharashtra, the major power are being sold to third party however the realization therefrom has been dwindling on account of high open access cost in the form of additional surcharge, increased cross subsidy surcharge stipulated by State Electricity Regulatory Commission. Added to the woes is restriction of banking to one month and introduction of forecasting and scheduling for every 15 minutes time block and deviation, if any resulting in levy of penalty charges. For certain wind mills where power is sold to State Utility, there has been delay in realization of about 10 months plus.

The sale of renewable energy certificates have been good with sale being at almost maximum rates in few months resulting in revenue from RECs being about 21% of the total revenue.


All machineries of the governments, all industries, all business and non-business entities and public at large are grappling with the pandemic COVID-19 Since February 2020 and as per the experts this is going to last over 2 years and may become a new way of life ie the virus and business activity has to live together with people taking all available precautions to protect precious life and at the same time earn for a living.

Couple with the pandemic as far as Companys operations are concerned like any other renewable energy entity many adverse regulatory changes have been worst than the pandemic. Some sites are recording negative earnings. The Company has taken lot of steps for cost reduction, tight cash flow management, policy changes to mitigate the downturn.

As it stands today, the steep increases and new type of levies through regulations, restrictions on banking especially in Maharashtra, belated payment of dues by utilities do not augur well for decent future for the Industry and Company. All talks of quantum increase in installation of RE Power in Giga watt scale will remain a pipe dream.


On the Renewable Energy Sector, the considerable delay in processing or decision making by state utilities and State Electricity Regulatory Commission and also the higher judicial authorities have been resulting in considerable strain on the liquidity front and also planning on the future projects.

The company continues to suffer due to multiple issues viz. state bifurcation, lack of funds, indecision in execution of PPA in the matter of realization of generation proceeds in Andhra Pradesh, delays in releasing the outstanding dues by state utility in Tamil Nadu and so also in Maharashtra coupled with ever increasing open access charges, Restriction on banking to mere one month from 12 months that as existed for more than two decades in Maharashtra , introduction of forecasting and scheduling across many states leading to payment of penalties for deviations are major concerns.

The experience of the company has been that inordinate delays in adjudication of the matters by Electricity Regulatory Commission, Appellate Tribunal for Electricity and higher courts result in acute pressure on the company due to huge mismatch in inflow and outflow of funds. In the wind power business the expenses are more or less fixed and also the loan repayment and interest to lenders like banks, however, the delayed receipt of generation proceeds necessitate that company has to resort to temporary borrowings to tide over the mismatch. This is also a concern as it has to bear the brunt of finance cost.

The Management Discussions and Analysis explaining the objectives of the company, the opportunities and threats, the outlook for the future, the risks and concerns have to be read with the meaning of relevant applicable laws and regulations. The actual physical performance may differ materially from those explained hereinabove.


The company has a system of internal controls to ensure that all its assets are properly safeguarded and protected against loss from unauthorized use or disposal. Further all the internal control system is practiced by the company to ensure that all transactions are authorized, recorded and reported correctly.

The Company has an Audit Committee of Directors which reviews the adequacy of internal controls.


The business in which the company is engaged does not call for large manpower resources.

The company has a team of able and experienced professionals. The work culture and value system in the company is designed to provide each employee the adequate space, freedom and guidance to bring out their full potential and provide personal growth opportunities within the organization. The human resource assets have been ably supporting the company despite the issues which the company is facing in its chosen field.


Sr. No. Parameters F.Y. 2019-20 F.Y. 2018-19
1 Debtors Turnover 69.60% 41.54%
2 Inventory Turnover 3.71% 5.32%
3 Interest Coverage Ratio 2.05 0.79
4 Current Ratio 0.60 0.89
5 Debt Equity Ratio 1.09 0.52
6 Operating Profit Margin (%) 90.16% 100.14%
7 Net Profit Margin (%) 0.54% (18.80%)
8 Return on Net Worth 0.41% (8.91%)

Note :

The ratios are in respect of ordinary activities and hence exclude impact of other comprehensive income.

The variation in Debtors Turnover is primarily on account of accumulated dues against supply of wind power from state utilities in Andhra Pradesh and Tamil Nadu where dues are pending over 1 to 3 years.

The variation in Interest Coverage Ratio is attributable to earnings before interest depreciation and tax in F.Y. 2019.20 being higher as compared to F.Y.2018-19 where in Loss on sale of Investments impacting the net Profit.

The variation in Current Ratio is primarily due to short term borrowings for meeting statutory obligations as dues from state utilities have not been forthcoming in a timely manner.

The variation in Debt Equity Ratio is due to increase in borrowings.