Rattanindia Power Ltd Management Discussions.


In the backdrop of global headwinds, economic growth in India is still expected to remain robust over the next couple of years. Post demonstrating strong economic growth of 3.5% in the year 2017 and 3.6% in 2018; global economic activity slowed down in the second half of 2018. The decline in growth is attributed to the trade tensions / sanctions, political uncertainty (likes of Brexit) and overall softening of demand. According to the International Monetary Fund (IMF), global growth is set to moderate over the near term: 3.3% for 2019, down from 3.6% in 2018. Growth for 2020 is expected to move back upto 3.6%. As per IMF projections, India is an outlier and is expected to grow at 7.3% in 2019 - the fastest growing economy in the world. India is powering ahead as the key economic growth engine in Asia, even as the largest Asian economy (China) is showing signs of slowdown. According to a Boston Consulting Group (BCG) report, India is expected to become the third largest consumer economy, with consumption exected to triple to US$ 4 trillion by 2025. Further, it is also estimated to become the second largest economy in terms of Purchasing Power Parity (PPP) by the year 2040, according to a report by PwC. However, rising crude oil prices and an increase in Non-Performing Assets in the banking system pose a considerable downside risk for the economy, along with tightening liquidity, if not addressed effectively on time. In the backdrop of a strong and stable political outlook for India, it is expected that sectorial reforms will gain pace and drive growth over the coming years.

Sustainable development of a country can only be achieved through a robust and efficient infrastructure sector that garners appropriate investment. Infrastructure projects are capital intensive with long gestation periods and rely on long term financial assistance from the banking system. Hence, a stable and enabling banking system is essential for achieving long term sustainable development of the country. Several infrastructure projects are currently under stress and categorized as NPAs – this is more acute in the power sector.

The Ministry of Coal through Coal India Limited, controls the concessional coal supplied to the IPPs, Ministry of Railways controls the rakes allocated to IPPs and the Discoms are mostly under the control of State Governments. Here, the Supplier of raw material (coal), Services (transportation) and Procurer of electricity are directly under control of either Central Government or State Government. The Government of India has already recognized the issues being faced by the power sector and has already set in motion many positive reforms initiatives for addressing the same.


Electricity is an essential constituent of infrastructure and a key contributor to economic growth of the Country. As per the advance estimates of National Income for the Financial Year 2018-19 released by the Govt of India, the Power sector contributed approximately 2.6% to the GDP. Total installed capacity of the country as on 31 March, 2019 was 356 GW, of which 226 GW is thermal, 78 GW is renewable, 45 GW hydel, and the rest nuclear. As per the National Electricity Plan presented by the Central Electricity Authority, the national electrical energy requirement is expected to be 2,047 Gigawatthours, with a peak demand of 299 GW by the year 2026-27.

A majority of the coal supplied to the Independent Power Producers (IPPs) is under the control of Coal India Limited (CIL), a Government of India Company. Between April-2018 and March 2019, CIL supplied 488 million tonnes of coal to the power utilities as compared to 454 tonnes during the corresponding period last year. Although, this represents an increase of 7.5% in coal dispatches, the power plants continued to suffer coal shortages during the peak electricity demand periods.

The Reserve Bank of India on 12th February 2018 issued a "Resolution of Stressed Assets – Revised Framework" Circular that established the procedure to be followed by Banks and Financial Institutions for resolution of NPAs, including classification of default for one days delay, requirement of 100% lender approval and mandatory reference to NCLT upon expiry of 180 days. Inspite of all our best efforts to mitigate risk, your Company underwent financial stress prima facie due to sectorial issues, which were beyond its control. Based on a quick assessment of the potential risks to the Company based on the Circular, your management proactively filed writ petitions before Honble Supreme Court and Honble Allahabad High Court. The Honble Supreme Court of India, while hearing on one such matter, ordered the transfer of all such pending cases before various courts to the Supreme Court. Post hearing all the parties, the Supreme Court on 2nd April 2019, struck down the RBI Circular. Subsequently, the RBI published a revised circular on 7th June 2019. The broad contours of this new circular includes early recognition of any stress, complete discretion of lenders to decide on the Resolution Plan, signing of binding Inter-Creditor Agreement to finalize and implement the Resolution Plan, etc. Referening the case to the IBC (Insolvency and Bankruptcy Code) was left to the discretion of the lenders.

To better understand the root cause/reasons for stress in the power sector, the Government of India constituted a High Level Empowered Committee (HLEC) in July-2018, headed by the Cabinet Secretary, with representation from various ministries (Railways, Coal, Power , Petroleum & Natural Gas), departments (Economic Affairs, Financial Services), and leading financial institutions of the country (SBI, PNB, PFC, REC & ICICI) to address issues related to Stressed Thermal Power Projects. The HLEC submitted its report on 12-November-2018. The Committee, in its report, highlighted a few key reasons leading to stress in the sector, including: a) inability of Coal India Limited to supply in full the committed coal quantity to power plants; b) slow down in demand for electricity, delayed payments to generators from the Discoms and c) delay in adjudicating disputes by the regulatory commissions/ tribunal.

Some of the key recommendation of HLEC for reducing the stress in the power sector relate to increasing the quantity of coal allocation for special forward auction for the power sector, discounting of receivables from DISCOMs by Public Financial Institutions such as PFC and REC, grant of coal linkage at notified coal prices to the IPPs having PPAs entered through competitive bidding, grant of coal linkage to power plants for sale of power under short term PPAs, etc. Cabinet Committee on Economic Affairs on 7-March 2019 approved most of the recommendations made by HLEC. With implementation of these recommendations, many of the issues affecting the Thermal Power Sector are likely to get resolved.

Further, Ministry of Power with effect from 1-August 2019 has made it mandatory for all Distribution Companies to provide and maintain Letters of Credit against all PPAs (Power Purchase Agreements) with Independent Power Producers (IPPs). This is a welcome move that will ensure that IPPs selling power to DISCOMs under long term PPAs are paid for all the power sold. Any Distribution Company not fulfilling the requirements will be barred from any power procurement from short term power markets. This will go a long way in improving the liquidity position of power generators and reduce stress in the system.


The gross energy generation target for 2019-20 is 1,330 BU. During the 12th five year plan, electricity generation grew at a compounded growth of 5.74%, with per-capita consumption of electricity increasing to 1,122 units. Per-capita consumption is expected to increase further with new government initiatives to increase power demand. The planned capacity expansion targets, along with the reduction in transmission and distribution losses, will further reduce the supply demand gap in the future. Peak power demand recorded was 164 GW and peak power demand met was 160 GW.

All India generation during FY 2018-19 was 1,376 BU, out of which only 126.76 BU (i.e., approx. 9.21% of total generation) was from renewable sources. Now, even if an additional 100 GW of new renewable capacity is added to the system over the next 5 years, the generation from renewables is expected to increase to approx. 300 BU against the expected all India generation of approx. 1,650 BU. This means that, even after 5 years from now, the generation from renewables shall only be ~18% of total generation. However, if the addition from renewables is only 50GW then the corresponding share of Renewables shall be 200 BUs (~12% share). Even NitiAayogs report on Energising India estimates that coal will continue to be the major contributor, contributing at as much as 50% of the total mix by 2047. Accordingly, it can be reasonably concluded that in India, coal fired power plants will continue to serve as the primary source providing electricity to more than a billion people in the Country.


The Power Sector directly or indirectly impacts almost all the sectors contributing to the growth of the nation. Setting up of a power project requires huge capital investments and take years of concentrated efforts for successful completion and commissiong. Hence, any slowdown in the power sector has a domino effect on overall economic growth. Critical issues impacting the performance of the sector are mentioned below:


Fuel forms approximately 55% - 60% of the total electricity cost. Hence, availability of coal of appropriate quality at a reasonable price is one of the key components for long term success of this sector. Supply of domestic coal has improved over the past couple of years. Coal India accounts for 80% of total domestic coal production in the country. The government is targeting coal production of 1.5 billion tonnes by 2030. Better coal availability will result in improved PAF of power plants. However, issues related to quality of coal still need to be addressed effectively. Allowing commercial mining of coal in the country would further improve coal availability for the thermal power plants . Further, regulatory issues pertaining to pass-through of coal prices has to be addressed in a expeditious manner to enhance cost recovery of power producers.

Inadequate transmission network

Large parts of India continue to remain power deficit despite huge capacity additions over the last several years. One of the major reasons for this situation is inadequate transmission capacity that limits flow of electricity to power deficit areas. Power evacuation remains a bottleneck in the power supply chain of the country resulting in frequent back downs of plants as requested by State/Regional Load Dispatch Center leading to under utilization of the generation capacity.

With the industry moving towards enhanced competition, and in an era of open access, demand for power is expected to increase, putting additional stress on the already stretched transmission network across the country. If Indias transmission capacity is not augmented in a timely manner, this problem is expected to further aggravate.

According to the CEA, during the year 2018-19, 22,437 circuit-km of transmission lines were added against planned 22,647 circuit-km lines, while enhancing the transformation capacity by an additional 72,705 MVA, against a plan of 62,600 MVA to the nations transmission grid. With the commissioning of these new transmission lines, congestion in transmission of electricity within inter-state and intra-state grids will reduce.

Financial health of state Discoms

Poor financial health of discoms is one of the major risks faced by power producers. To bail out debt-laden distribution utilities, the Power Ministry implemented the Ujwal DISCOM Assurance Yojana (UDAY). A total of 27 states and 5 UTs have adopted UDAY scheme till date. UDAY states have reduced book losses to र 15,049 crore in FY 2017-2018 from र 51,480 Cr in FY 2015-2016. This is likely to improve the financial health of discoms that would further help in reducing the stress of generation projects. The primary reason for poor financial health is huge AT&C losses, operational inefficiencies and populist schemes.

Distribution Reforms

The Distribution Sector plays a crucial role in the overall functioning of the Power Sector as it provides final connectivity of power to consumers and generates the cash flow for the entire value chain. The Government is putting significant effort to improve the financial health of utilities so as to enable them to provide reliable and quality power supply and universal access to power. Government has done a remarkable job in reducing the time taken by any person to obtain a new electricity connection, improving the connectivity of villages with the state grids under the scheme for electrification of all villages, etc. We hope that the steps taken by government will help in ameliorating the current situation. In this regard, impending segregation of content from carriage will be a game changer for the Indian power distribution sector.


Your company has a well formulated strategy to tackle the challenges that the sector is facing currently. Both the plants of the Company have all key resources in place - viz., land, fuel linkage, water, financing arrangements, etc.

With 2,700 MW commissioned capacity, the Company is amongst the top 10 Private Power Producers in the country. Amravati Thermal Power Plant (Amravati TPP) has a long term arrangement for supply of 1,200 MW to the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) and all the five units of Amravati TPP are available for supplying power. Sinnar Thermal Power Plant (Sinnar TPP) was commissioned in June-2017. Sinnar TPP has received a Letter of Intent from MSEDCL for the supply of 507 MW power under a long term PPA for a period of 25 years from this plant. As on the date of issuance of notice to the memebrs for Annual General Meeting, the Company was in the process of arranging the necessary Bank Guarantee for signing of PPA and operationalization of the power project.

The Company continued to operate at sub-optimal levels due to lower demand of electricity form MSEDCL. Pursuant to this suboptimal operation of plant, Company has been under financial stress. With an aim to resolve the severe financial stress, the Promoters along with the Company offered Binding One Time Settlement Proposal to the Lenders on 6-Dec-2018 (Binding Settlement Proposal). Company also received the letter of intent from Lenders with respect to the Binding Settlement Proposal. Subsequently, the Company submitted a revised Settlement Proposal to the lenders which is currently under discussion between Lenders, Investors and the Company. It is expected that such discussion will be concluded soon.


Your company has the following competitive strengths amongst other which will enable it to achieve a strong position in the Power Sector:

Statutory and Non-statutory Clearances

Your company has obtained all required clearances, necessary for the sucessfull operations of the Amravati Thermal Power Project and Sinnar Thermal Power Project.

For the Amravati Thermal Power Project, the Company has leased 1,350 acres of land from Maharashtra Industrial Development Corporation (MIDC), signed a Fuel Supply Agreement for 5.493 MTPA coal with South Eastern Coalfields Limited, obtained 87.6 million cubic meter water allocation from upper Wardha dam from Vidharbha Irrigation Development Corporation and has secured the consent to operate from Maharashtra State Pollution Control Board.

For Sinnar Thermal Power Project, Sinnar Thermal Power Limited has leased 1,069.35 acres of land in Nasik SEZ developed by Indiabulls Industrial Infrastructure Ltd, has coal allocation for total 5.226 MTPA coal from South Eastern Coalfields Limited & Mahanadi Coalfields Limited and 36.5 million cubic meter water allocation from Water Resource Department, Nasik.

Financial Closure

Amravati and Nasik power projects have achieved financial closure.

Power Purchase Agreement

Amravati thermal power project has a 1,200 MW PPA with MSEDCL. Further, the Company has received a letter of Intent from MSEDCL for signing of PPA for supplying 507 MW from Nasik thermal power project for 25 years.

Fuel Security

Your Company has Fuel Supply Agreements (FSA) with Coal Companies, supplying coal at prices notified by Ministry of Coal. This puts your Company in a very strong competitive position as compared to the present mechanism wherein coal linkages are granted through e-auction process where bidders either offer premium over notified prices of coal or offer discount on the tariff for supply of power under PPA.

Execution Team

One of the key strengths of your company is the team of experts who have vast experience of constructing, commissioning and operating large power projects. Senior management of the Company comprises of people from Navratna Companies such as like NTPC, BHEL to name a few and who have vast experiences in the implementation and operation of thermal power projects. This team is capable of addressing the challenges currently being faced by thermal power projects in the country.


The key elements of the Companys strategy include:

Capitalizing on the opportunities in Indian power generation sector

Your Company has planned significant long term initiatives to capitalize on the huge potential presented by the Indian power sector. With a growing economy, there will be an increase in electricity demand and therefore, significant investment will be required across generation, transmission and distribution assets to fulfill this demand and fulfill Government of Indias ambitious target of providing ‘Power for All. We have the expertise, ability to raise capital and execute large scale power projects to reap the benefits of growth in the sector.

Leveraging of project execution and operating skills

Your Company has developed good project planning and project execution capabilities and keeping in mind the complexity of power projects, we have hired project managers with the ability and skill sets to drive projects to successful completion and commissioning. Your Company has a robust workforce with good project execution and plant operating skills that will enable the Company to build world class power plants with a focus on operational efficiency.

Ensuring fuel security

Your Company has adequate coal linkages/FSA with Coal India Limited to ensure a steady supply of coal to fire the power plants. Further, any shortfall in coal supply will be met through the use of imported coal in line with prevailing procurement guidelines and the PPAs.

Engaging in an optimal mix of off-take arrangements with state-owned and industrial consumers

Your Company intends to maintain an appropriate mix of off-take arrangements. Your Company believes that secured off-take arrangements will provide a level of committed revenues whilst short-term arrangements will enable the Company to realize higher tariffs from time to time, depending upon market conditions. The Company intends to utilize its marketing and trading capacities and capabilities to secure off-take arrangements with state-run utility companies and industrial consumers, as well as carry out merchant sales of power at market rates. The Company intends to enter into bilateral contracts on a term-ahead basis with industrial consumers and Discoms through open access. Government of India has created the DEEP portal through MSTC for conducting bid process for short term purchase of power by Discoms. Your Company is also exploring opportunities for short term sale through this portal.

Operating power plant at the highest availability:

It is vital that a power station has a high plant availability factor (PAF), which is a necessary pre-condition to achieving a higher Plant Load Factor (PLF). Unplanned outages can result in loss of revenue. Your Company has in place a team of very experienced and skilled O&M experts to run its power plants smoothly with the highest possible availability.


Your Companys human resource policy provides an environment that motivates its employees to realize their full potential. Your Company respects each employee, motivates them and tries to offer opportunities based on their skill-sets, and in this process builds mutually benefiting relations between the Company and its employees. Your Company has put in place a policy that not only increases productivity but also increases job satisfaction of its employees.

Your company has established systems, which aim to provide training to employees at every level of the organization that leads to quality work output in turn helping in improving the bottom-line of your company.

In addition to this, proper remuneration, regular appraisal and development opportunities provided to the employees have enabled your Company to achieve its goal in a highly competitive market. Your Company believes that its employees are most productive when they have a good work-life balance to enable them to meet their responsibilities outside work and minimizes employee turnover.


Corporate Social Responsibility Policy (CSR Policy) was framed in the year 2014 and a Corporate Social Responsibility Committee comprising members from the Board of Directors of the Company was formed. The committee is entrusted with the responsibility of effectuating and operationalizing the CSR Policy of the Company.


The Company has a system of internal controls commensurate with the nature and size of its operations, which effectively and adequately encompasses every facet of its operations and and functional areas.

The system involves a compliance management team with established policies, norms and practices as also the applicable statutes and rules and regulations with an inbuilt system of checks and balances, so that appropriate and immediate corrective actions are initiated in right earnest in the event of any deviations from the stipulated standards and parameters.

The effectiveness and deliverability of the internal control system is reviewed periodically so that measures, if any, needed for strengthening of the same, with the changing business needs of the Company, can be taken.

Operational Performance:

During FY 2018-19, Amravati Thermal Power Project achieved an availability of 73.57% and Plant Load Factor of 34.45% as against 69% availity and 40.35% PLF in the previous FY 2017-18. Plant Availability was affected due to lower coal despatches from SECL during the months from Sep-2018 to Dec-2018. The Company exported 3,717 million units (MU) of electricity to MSEDCL during the financial year.

Financial Performance:
Particulars FY 2018-19 FY 2017-18
Generation Sales (MU) 3,717.12 4,350.56
Net Sales ( Crore) 1,909.27 2,015.38
Profit before exceptional items and tax ( crore) (454.23) (411.47)


During the Year under review, there were following changes in Key Financial Ratio;

S. No. Ratio Formula

Ratio (%)

31-Mar-19 31-Mar-18
1 Inventory Turnover COGS/Average Inventory 358% 1108% Due to Increase in Inventory in Current FY
2 Debt Equity Ratio Debt/Equity 384% 168% Equity Includes the Exceptional ltems of र 2337.31 Cr against provision taken for impairment of Investment, Advance & ICD.
3 Operating Profit Margin (%) Operating Profit before Int. & Tax/Total Revenue 23% 18% -
4 Return on Net Worth Net Income / Shareholders equity -25% -9% Equity Includes the Exceptional ltems of र 2337.31 Cr against provision taken for impairment of Investment, Advance & ICD.


Statements in this Management Discussion and Analysis Report, describing the Companys objectives, projections, estimates and expectations, may be forward looking statements within the meaning of applicable Laws and Regulations and the actual results might differ from those expressed or implied herein.

The Company is not under any obligation to publicly amend, modify or revise any such forward looking statements on the basis of any subsequent developments, information or events.