Ravindra Energy Ltd Management Discussions.

(A) INDUSTRY STRUCTURE AND DEVELOPMENT

Ravindra Energy Limited and its subsidiaries were engaged in the business of trading of coal, installation and commissioning of rooftop, ground mount and photovoltaic solar systems, sale of solar system for water pumping, generation and sale of electricity, etc. Solar power in India is a fast developing industry. The countrys solar installed capacity reached 23 GW as of June 30, 2018. India expanded its solar-generation capacity 8 times from 2,650 MW on May 26, 2014 to over 20 GW as on January 31, 2018. The 20 GW capacity was initially targeted for 2022 but the government achieved the target four years ahead of schedule. The country added 3 GW of solar capacity in 2015-2016, 5 GW in 2016-2017 and over 10 GW in 2017-2018, with the average current price of solar electricity dropping to 18% below the average price of its coal-fired counterpart.

Karnataka is the top solar state in India exceeding 5,000 MW installed capacity by the end of financial year 2017-18. The installed capacity of Pavagada Solar Park is 600 MW and its ultimate 2,000 MW installed capacity is expected by the end of year 2020.

Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nation. The existence and development of adequate infrastructure is essential for sustained growth of the economy. Sources of power generation range from conventional sources to viable non-conventional sources such as wind, solar, agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country massive addition to the installed generating capacity is required.

INDIAN SCENARIO Electricity generation

Grid-connected solar electricity generation has reached nearly 2% of total utility electricity generation. Solar generation meets the daytime peak load in non-monsoon months when electricity spot prices exceed the daily average price.

Year Solar power generation (TWh)
2013-14 3.35
2014-15 4.60
2015-16 7.45
2016-17 12.09
2017-18 25.87

Monthly solar power generation in India, April 2017 - March 2018

Month Total (GWh)
April - 2017 1,752.74
May - 2017 1,931.30
June - 2017 1,803.35
July - 2017 1,661.29
August - 2017 1,660.26
September - 2017 2,002.51
October - 2017 2,186.00
November - 2017 2,094.59
December - 2017 2,242.64
January - 2018 2,547.77
February - 2018 2,677.10
March - 2018 3,311.53
Total (GWh) 25,871.08

Solar photovoltaic growth forecasts

In August 2016, the forecast for solar photovoltaic installations was about 4.8 GW for the calendar year. About 2.8 GW was installed in the first eight months of 2016, more than all 2015 solar installations. Indias solar projects stood at about 21 GW, with about 14 GW under construction and about 7 GW to be auctioned. The countrys solar capacity reached 19.7 GW by the end of 2017, making it the third- largest global solar market.

In mid-2018 the Indian power ministry flagged a tender for a 100GW solar plant at an event in Delhi, while discussing a 10GW tender due to be issued in July that year. The ministry also increased the government target for installed solar by 2022 to 227 GW.

(B) OPPORTUNITIES AND THREATS

The opportunities in solar power sector are manifold owing to its multi level value chain. India under its green initiatives has rolled out multiple policies in support of solar mission. As a consequence the Indian solar energy market with multiple opportunities along its value chain has opened its doors to many players.

The land is scarce in India, and per-capita land availability is low. Dedication of land for the installation of solar arrays must compete with other needs. The amount of land required for utility-scale solar power plants is about 1 km2 (250 acres) for every 40-60 MW generated. One alternative is to use the water-surface area on canals, lakes, reservoirs, farm ponds and the sea for large solar-power plants. These

water bodies can also provide water to clean the solar panels. Highways and railways may also avoid the cost of land nearer to load centres, minimising transmission-line costs by having solar plants about 10 meters above the roads or rail tracks. Solar power generated by road areas may also be used for inmotion charging of electric vehicles, reducing fuel costs. Highways would avoid damage from rain and summer heat, increasing comfort for commuters.

The architecture best suited to most of India would be a set of rooftop power-generation systems connected via a local grid. Such an infrastructure, which does not have the economy of scale of mass, utility-scale solar-panel deployment, needs a lower deployment price to attract individuals and familysized households. Photovoltaics are projected to continue their cost reductions, becoming able to compete with fossil fuels.

Greenpeace, a non-governmental environmental organization, recommends that India adopt a policy of developing solar power as a dominant component of its renewable-energy mix, since its identity as a densely- populated country in the tropical belt of the subcontinent has an ideal combination of high insolation and a large potential consumer base. In one scenario India could make renewable resources the backbone of its economy by 2030, curtailing carbon emissions without compromising its economic- growth potential. A study suggested that 100 GW of solar power could be generated through a mix of utility-scale and rooftop solar, with the realizable potential for rooftop solar between 57 and 76 GW by 2024.

It is considered prudent to encourage solar-plant installations up to a threshold (such as 7,000 MW) by offering incentives. Otherwise, substandard equipment with overrated nameplate capacity may tarnish the industry. The purchaser, transmission agency and financial institution should require capacity utilisation and long-term performance guarantees for the equipment backed by insurance coverage in the event that the original equipment manufacturer ceases to exist. Alarmed by the low quality of equipment, India issued draft quality guide lines in May 2017 to be followed by the solar plant equipment suppliers conforming to Indian standards.

The solar sector is also facing the challenges such as cost of financing makes the energy projects with thin margins and less attractive, projects require longer tenure of loan, inherent seasonality of power generation adversely impacts cash flows especially if it gets commissioned during non productive season, capital expenditure is significantly higher as compared to conventional sources, complexity of subsidy structure, delays in acquiring land and statutory clearances, distribution companies sign PPA only after companies have secured land, considerable delay in providing grid connectivity and non availability of skilled manpower.

Government support

The Government has allowed foreign investment in Renewal Energy Sector and this has led to increased cut-throat competition. The Central Government has withdrawn subsidies on Solar Power Pumping Systems through NABARD. The State Government has also received instructions from MNRE to complete the on-going project on or before September 30, 2018, as MNRE shall withdraw the advanced subsidy thereafter. Thus, a negative trend in the government policies has and shall continue to affect the sector to a greater extent. The government has also reduced the tariff rates drastically.

Solar PV Tariff

The current prices of solar PV electricity is around 18% lower than the average price for electricity generated by coal-fired plants. Competitive reverse auctions, falling panel and component prices, the introduction of solar parks, lower borrowing costs and large power companies have contributed to the fall in prices. The cost of solar PV power in India, China, Brazil and 55 other emerging markets fell to about one-third of its 2010 price, making solar the cheapest form of renewable energy and cheaper than power generated from fossil fuels such as coal and gas.

The Indian government has reduced the solar PV power purchase price from the maximum allowed Rs. 4.43 per KWh to Rs. 4.00 per KWh, reflecting the steep fall in cost of solar power-generation equipment.

Solar PV generation cost fell to Rs. 2.97 per kWh for the 750 MW. Solar panel prices are lower than those of mirrors by unit area.

The lowest solar tariff in May 2018 is Rs 2.71 / kWh (without incentives). In early July 2018 bids, the lowest solar PV tariff has touched Rs. 2.44 per kWh (without incentive). The tariff for rooftop installations are also falling with the recent offer of Rs. 3.64 with 100% locally made components.

(C) SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The details of project implementation and business development is given in the Directors Report under the head Projects. The segment-wise performance is as under -

Standalone (Rs. in Million)

Revenue from Operations 2017-18 2016-17
Traded Coal 155.38 255.07
Solar System for Water Pumping 109.16 119.27
Solar Sales - Others 0.03 0.00
Sale of Electricity 6.50 5.53
Contract Revenue 198.13 160.00
Total 469.20 539.87

Consolidated

Revenue from Operations 2017-18 2016-17
Traded Coal 155.38 1,411.03
Traded Sugar 3,536.96 4,510.71
Solar Systems 307.31 279.27
Sales of Electricity 174.85 5.53
Total 4,174.50 6,206.54

(D) OUTLOOK

India which falls in a tropical region has tremendous potential for solar energy power generation so it looks to position itself as one of the worlds major solar power producers in the coming years. The countrys installed capacity for solar power generation has increased tremendously during the past couple of years. Rising economic and infrastructural development in the country has widened electricity demand supply gap, induced high irradiation levels, pushed favourable government policies and enabled huge investments, thus supporting growth for its solar industry. As such the cumulative installed solar power generating capacity is anticipated to reach 100 GW by 2022.

(E) RISKS AND CONCERNS

The Company has constituted Risks Management Committee, to monitor and review risk. Risk Management Policy has been framed and the Company is committed to managing the risk in accordance with the process set out in this policy to benefit the Company.

Dust, high temperatures and the dearth of water are contributing to a significant increase in the cost of operating solar power plants. Some of these factors, such as the level of dust particles and the type of dust, vary from region to region within the country, while other factors such as the hardness of the water and the shortage of a skilled labour force are more general problems faced by plants across the country.

Further, in the rush to build market share in this exciting sector, some players have become very aggressive in the competitive auction process and are bidding very low tariffs with fairly low returns. There is a fear that some of these projects could become unviable because developers will find it difficult to raise funds at attractive interest rates and contain high project costs.

Low tariffs can also negatively impact the governments target of achieving 100GW by 2022. We need to attract more players and many more investors into this nascent sector. This will come only if the returns are attractive for investors. Hence, it is important that every project remains viable from both aspects-tariff and profitability.

Viability of solar power projects in India has become a serious cause for concern. The recent decision of the Supreme Court not to allow a revision of the tariff charged by

Tata Power Co. Ltd and Adani Power Ltd for their 4,000 MW (megawatt) and 4,620 MW Mundra ultra-mega power projects based on Indonesian coal has added to the woes.

(F) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The compliance certification from CEO and CFO provided in Annual Report confirms the adequacy of our internal control system and procedure The Audit Committee in every meeting evaluates internal financial controls and risk management systems.

(G) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) and comply with the accounting standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.

Standalone results

The standalone revenue from operations for the year ended March 31, 2018 was Rs. 469.19 million and other income was Rs. 50.80 million, aggregating to Rs. 519.99 million, as against revenue from operations of Rs. 539.87 million and other income of Rs. 61.38 million, aggregating to Rs. 601.25 million for the previous year ended March 31, 2017. The Company earned profit after tax of Rs. 38.90 million for the year ended March 31, 2018 as compared to Rs. 63.25 million earned for the previous year ended March 31, 2017. Revenue from operations includes trading of coal, installation and commissioning, sale of solar system for water pumping, sale of electricity, etc.

Consolidated results

The consolidated revenue from operations for the year ended March 31, 2018 was Rs. 4,174.50 million and other income was Rs. 73.72 million, aggregating to Rs. 4,248.22 million, as against revenue from operations of Rs. 6,206.55 million and other income of Rs. 230.86 million, aggregating to Rs. 6,437.41 million for the previous year ended March 31, 2017. The Company incurred a consolidated loss of Rs. 1,397.69 million for the year ended March 31, 2018 as against consolidated loss Rs. 18.09 million incurred for the previous year ended March 31, 2017.

(H) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

The total work force of the Company is 52. Number will be increased with the growth of business of the Company. The Company is aware that satisfied highly motivated and loyal employees contribute to the growth of the Company. The employee relations remained cordial throughout the year.