rec ltd share price Management discussions

The management of the Company is pleased to present its report on the business environment & industry scenario, industry risks, opportunities and the Companys financial & operational performance during the financial year 2021-22.


Global Business Environment

Global economic prospects are clouded with heightened uncertainty and downside risks from geopolitical conflict, and the spillovers are reverberating across the world. The escalation of geopolitical risk, surge in crude oil prices and intensified volatility across global financial markets may smother the global recovery, which is at nascent stage. This is happening at a time when most countries are still reeling under the pandemic and elevated inflation.

The war in Ukraine has triggered a costly crisis, which could become overwhelming for economies without a swift and peaceful resolution. Global growth is expected to slow significantly in 2022, largely as a consequence of the war. This crisis has unfolded when the global economy was on a mending path from the pandemic, but had notyetfully recovered, with a significant divergence in the recovery path of advanced economies vis-a-vis emerging market and developing economies. In addition to the war, frequent and wide-ranging lockdowns in China, including in key manufacturing hubs, have slowed down the manufacturing activity, which could cause bottlenecks in the global supply chains. Higher, broader and more persistent price pressures have led to the tightening of monetary policy in many countries. Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging.

The growth in global trade remained strong during 2021, as its value continued to increase through each quarter. Trade growth was not only limited to goods, the trade in services also grew substantially and reached pre-pandemic levels during the last quarter. A report by the United Nations Conference on Trade and Development says that overall, the value of global trade reached a record level of USD 28.5 trillion in 2021, which is an increase of 25% over 2020 and 13% higher than 2019, before the pandemic struck. Trade in services rose by USD 50 billion to reach USD 1.6 trillion, just above the pre-pandemic levels. Trade growth in 2022 is likely to be lower than expected, given the macroeconomic trends like persistent inflation in the United States and concerns relating to Chinas supply chain and real estate sector.

The global economy entered the year 2022 in a weaker position than previously expected. As new variants of Covid-19 spread, many countries re-imposed their mobility restrictions. Rising energy prices and supply disruptions resulted in higher and more broad-based inflation than anticipated. The slower-than-expected recovery of private consumption has also limited growth prospects.

Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. Beyond 2023, the forecast declines to about 3.3% over the medium term. Crucially, this forecast assumes that the conflict remains confined to Ukraine, further sanctions on Russia exempt the energy sector (although the impact of European countries decisions to wean themselves off Russian energy and embargoes announced through March 31,2022, are factored into the baseline), and the pandemics health and economic impacts subside over the course of 2022.

Inflation is expected to remain elevated for longer than the previous forecasts, driven by war-induced commodity price increases and broadening price pressures. For 2022, inflation is projected at 5.7% in advanced economies and 8.7% in emerging market and developing economies.

On one hand, the outbreaks of pandemic and weather disruptions have resulted in shortages of key inputs and lowered the manufacturing activity in several countries. On the other hand, these supply shortages, alongside the release of pent-up demand and rebound in commodity prices, have caused consumer price inflation to increase rapidly in, for example, the United States, Germany and many emerging market and developing economies. Food prices have increased the most in low-income countries, where food insecurity is most acute, adding to the burdens of poorer households. The economic costs of war are expected to spread farther afield through commodity markets, trade and financial inter-linkages etc. Fuel and food price rises are already having a global impact on the vulnerable populations.

The role of Russia and Ukraine in the global value chains goes beyond typical commodity linkages. Disruptions in upstream sectors can therefore cascade beyond bilateral trading partners. For instance, production of neon gas, which is an input in the manufacture of silicon chips, is concentrated in Russia and Ukraine. Interruptions have caused silicon chip shortages, which is leading to downstream production bottlenecks in automobiles and electronics. Global car production is also affected by the war, as disruptions to Ukraines production of electronic wiring systems have contributed to automobile plant shutdowns in Germany. Protracted shortages of metals exported from Russia, such as palladium and nickel, will increase the cost of items including catalytic converters and batteries. Further, disruptions in export of potash fertilizers from Belarus will affect the food production elsewhere and worsen the food prices.

After a small drop in 2020, the global electricity demand grew by 6% in 2021. It was the largest ever annual increase in absolute terms (over 1500 terrawatt hours) and the largest percentage rise since 2010 after the financial crisis. Around half of the global growth took place in China, where demand increased by an estimated 10%. Coal met more than half of the increase in global demand. Coal-fired electricity generation reached an all-time peak, growing by 9%, whereas renewables grew strongly by 6%. Gas-fired generation grew by 2%, while nuclear energy increased by 3.5%, almost reaching the 2019 levels. C02 emissions from electricity also rose by close to 7%, taking them to a record high. During 2022-24, it is expected that renewables will grow to match the moderate demand growth. It is also anticipated that the average annual electricity demand growth would be 2.7%, but the pandemic and high energy prices add uncertainty to this.

Indian Business Environment

Indias broad range of fiscal, monetary and health responses to Covid-19 crisis, supported its recovery and helped in mitigating a longer-lasting adverse impact of the pandemic.

As per Reserve Bank of India (RBI), Indian economys real gross domestic product (GDP) bounced to 8.9% in FY 2021-22, i.e., 1.8%. above its pre-pandemic (2019-20) level. Economic activity, which gained strength in Q2 FY 2021-22 (July-September) with the ebbing of the second wave, has lost pace since Q3 (October- December), aggravated by the spread of Omicron variant in Q4 (January-March).The beneficial effects of the receding infections have been overwhelmed by the geopolitical conflagration since February 2022. Consumer Price Index (CPI) inflation edged above the uppertolerance band in February as unfavorable base effects combine with the onset of supply shocks caused by the conflict. The geopolitical tensions have cast a shadow on Indias economic outlook.

Although Indias direct trade exposure to countries at the epicenter of the conflict is limited, the war could potentially impede the economic recovery through elevated commodity prices and global spill over channels. Further, financial market volatility, induced by monetary policy normalization in advanced economies, renewed spate of Covid-19 infections in some major countries with augmented supply-side disruptions and protracted shortages of critical inputs, such as semi-conductors and chips, pose downside risks to economic outlook. Taking all these factors into consideration, real GDP growth for FY 2022-23 is now projected at 7.2% as per RBI, assuming crude oil (Indian basket) at USD 100 per barrel during 2022-23.

The International Monetary Fund (IMF), in its latest World Economic Outlook report, has slashed its forecast for Indias FY 2022-23 GDP growth from 9% to 8.2%, forecasting higher commodity prices, which might weigh on private consumption and investment, besides lower net exports. Indias FY 2022-23 current account deficit is expected to be 3.1%, compared to 1.5% expected for FY 2021-22. There was also a cut in Indias FY 2023-24 GDP growth forecast by IMF, from 7.1 % to 6.9%. The outlook has deteriorated, largely in view of the war and consequent sanctions. On the contrary, Asian Development Bank(ADB) has expected Indias GDP growth to be at 7.5% in 2022-23 and 8% in 2023-24.


Industry Overview

India is one of the largest producer and consumer of electricity in the world. Its power sector is one of the most diversified in the world, which includes power generation from conventional sources (coal, lignite, natural gas, oil, hydro and nuclear power) and non-conventional sources (wind, solar, and agricultural & domestic waste). As on March 31, 2022, the total installed capacity of power stations in India stood at 399.49 GW.The fuel-wise installed generation capacity from fossil fuels like coal, lignite, gas and diesel stood at 236.11 GW, whereas non-fossil fuels like hydro,small hydro, wind,solar, waste-to-energy and other renewable energy, including nuclear energy, contributed to 163.38 GW.

The power sector is crucial to push economic growth and facilitate recovery. The sector made significant progress in 2021, but there are challenges, such as enhancing the green energy cover, promising reliability and resilience, enhancing security and reduction in cost. In 2022, the Indian power sector will have to find solutions for the problems like power cuts, financial losses, swift technological up-gradation and cost cutting. The advent of state-of-the-art technologies has empowered all sectors to realize their potential, while enhancing the comfort of end consumers.The need to harness the power of technology has been underlined by the pandemic. The power sector will have to upgrade itself with the technology to ensure de-carbonization, digitalization and decentralization. The objectives of sustainable energy, technological up-gradation, private sector participation, energy storage and electrification of sectors such as transportation have to be achieved.

The past few years have seen major developments in the power distribution sector in India. The country has now achieved universal access to electricity. Flowever, power distribution continues to be the weakest link in the power sector supply chain. Most distribution utilities are making losses, as a consequence of expensive long-term power purchase agreements, poor infrastructure and inefficient operations, amongst others. These losses, in turn, prevent them from making the investments required to improve the quality of power supply and to prepare for wider penetration of renewable energy. The inability of distribution utilities to pay power generators, endangers the financial health of the sector including the lenders, causing a negative domino effect on the economy as a whole. It is with this background, that concrete measures have to be taken towards discom viability.



The installed power generating capacity in the country as on March 31,2022 was 399.49 GW, in which 99,005 MW (24.6%) was from Central sector, 1,04,855 MW (26.2%) was from State sector and 1,95,637 MW (49%) was from private sector.

In terms of generation capacity by type, as on March 31, 2022, the installed capacity under thermal was 2,04,080 MW (51.1%), lignite was 6,620 MW (1.7%), gas was 24,900 MW (6.3%), diesel was 510 MW (0.1%) and renewables was 1,56,608 MW (39.2%). Renewable energy sources included hydro projects, small hydro project, biomass, wind, solar, waste-to-energy etc. Installed capacity of nuclear power remained at 6,780 MW (1.7%).

The Plant Load Factor (PLF) in FY 2021-22 for thermal power plants across the country was 69.71% for central plants, 54.50% for state sector plants and 53.62% for private sector plants.The total electricity generation (including renewable sources) during the financial year 2021-22 was 1491.80 BUs which was a growth of 7.96% over the total generation in last year.

Renewable Energy

As part of the Paris Agreement, India has committed to install 40% of its electricity generation capacity from non-fossil fuels by 2030. Further, a target of 500 GW installed renewable energy capacity by 2030 has also been fixed.

As of March 31, 2022, Indias installed renewable energy capacity stood at 156.60 GW, representing 39.2% of the overall installed power capacity. Solar energy is estimated to contribute 53.99 GW, followed by 40.35 GW from wind power, 10.20 GW from biomass co-generation, 0.5 GW from waste to energy, 4.84 GW from small hydro power and 46.72 GW from hydropower.

The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked 4th in terms of renewable installed capacity, besides 4th in wind power and 5th in solar power as of 2020. India is the only country among G20 nations that is on track to achieve its targets under the Paris Agreement.

The Government of India had announced a production-linked incentive (PLI) scheme worth Rs. 4,500 crore for manufacturing high-efficiency solar PV modules over a period of five-years. In order to give further impetus to domestic manufacturing, the Government has agreed to impose basic custom duty on import of solar PV cells and solar PV modules with effect from April 1,2022.

Transmission & Distribution Transmission

Transmission, an important element in the power delivery value chain, facilitates evacuation of power from generating stations and its delivery to the load centers. The transmission sector works as a fulcrum for the progress of power generation and distribution segments. An extensive network of transmission lines has been developed over the years for evacuating power produced by different electricity generating stations and distributing the same to the consumers. The nominal extra high voltage lines in vogue are ? 800 kV HVDC & 765 kV, 400 kV, 230/220 kV, 110 kV and 66 kV AC lines. Transmission system is playing a catalyst role in energy transition of the country, by extending the grid to renewable rich areas and facilitating renewable energy projects to connect into the grid. Continuous addition in transmission capacity has helped in increase of the contribution of renewable energy by three times, i.e., from 35.52 GW in financial year 2014-15 to 109.88 GW in financial year 2021-22 (excluding hydro).

For efficient dispersal of power to deficit regions, strengthening the transmission system network, enhancing the inter-state power transmission system, augmentation of National Grid and enhancement of transmission system network are required. Going forward, the private sector is expected to play a key role in achieving the countrys grid expansion targets, as competitive bidding gains momentum at both inter-state and intra-state levels. Several grid expansion programmes such as the GEC (Green Energy Corridor) and cross-border links are underway, to expand the physical grid infrastructure. Transmission utilities, at the Central and State level, are expected to invest significantly in new technologies to make the grid more reliable, resilient, secure and smart.The sector is also expected to benefit immensely from policy & reform measures planned ahead.

During the financial year 2021-22, a total of 14,895 cKm (circuit kilometers) of transmission lines were added, as compared to about 16,750 cKm during the previous year. Asset monetization, i.e., to create a capital pool for more projects, has been a key focus area of the Government in the transmission segment. State-run PowerGrid Corporation of India Limited is transferring transmission assets worth around Rs. 7,500 crore, to the newly launched PowerGrid Infrastructure Investment Trust (InvIT). The InvIT has distributed a dividend of Rs. 4.50 per unit since it was launched in May 2021.


Distribution is the most important link in the entire power sector value chain,as it interfaces between the utilities and consumers. Historically, power distribution has been the monopoly of Government-owned utilities, and is in the realm of State Governments, with the private sector playing only a limited part. The sector has been reeling under losses, making it crucial for the policy makers to devise various measures to make the State discoms & utilities viable.

The Ministry of Power (MoP), Government of India has made several interventions to improve financial & operational efficiencies of discoms linked to reform measures, including Liquidity Infusion Scheme (LIS) under Atmanirbhar Bharat; additional borrowing of 0.5% of GSDP (Gross State Domestic Product) to States linked to power sector reforms, introducing additional prudential norms for lending by REC Limited and Power Finance Corporation Limited (PFC) based on performance of utilities and Revamped Distribution Sector Scheme (RDSS), etc.

In the last few years, distribution reforms like revision of tariff. National Electricity Fund (NEF) and Ujwal Discom Assurance Yojana (UDAY), have already started to show positive results for discoms.The ambitious Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) scheme, which was started in 2017, provided electricity connections to nearly 3 crore families in rural and urban areas. The Government had also issued an order dated June 28,2019, enforcing opening and maintaining of adequate Letter of Credit (LoC) as payment security mechanism under power purchase agreement (PPA) by distribution licensees.The order mandates NLDC (National Load Dispatch Centre) and RLDC (Regional Load Dispatch Centres) to dispatch power, only after the generating companies intimate and confirm the opening of LoC by discoms.

In the backdrop of outbreak of Covid-19 pandemic, the Central Government had announced a Liquidity Infusion Scheme as part of Atmanirbhar Bharat on May 13, 2020, under which REC and PFC have extended special long-term transition loans at concessional rates to discoms. The loans were against the receivables of discoms from State Governments, in the form of electricity dues and subsidy not disbursed, to enable them to clear their outstanding dues as existed on June 30,2020 towards central public sector undertakings, generation & transmission companies, independent power producers and renewable energy generators. Various distribution utilities in the country have been sanctioned total loans worth Rs. 1.40 lakh crore and disbursed loans worth Rs. 1.12 lakh crore so far, under the LIS scheme. These reform measures are aimed at improving the financial health of discoms, leading to a reduction in outstanding dues to power generating companies.

Power Sector Policy Environment

Power is one of the key sectors attracting FDI inflow into India. 100% FDI is allowed under the automatic route in the power segment and renewable energy.

The Government of India has taken significant policy measures in the past years to restructure the power sector, increase capacity and improve transmission, sub-transmission & distribution network etc. The Electricity Act of 2003 brought sweeping changes to the legal framework governing the sector, which was followed by notification of National Electricity Policy, National Tariff Policy, Renewable Energy Policy, National Hydro Policy and Mega Power Policy, reflecting the measures taken by the Government to bring competitiveness and efficiency in the sector.

The Rural Electrification Policy was notified in August 2006, with the objective of improving access and quality of electricity supply in rural areas to ensure rapid economic development, by providing electricity as an input for productive uses in agriculture, rural industries etc.

Over the past few years, Indian power sector has undergone significant transformation that has redefined the industry outlook, through path-breaking policy initiatives such as UDAY, Power for All, UJALA, village & household electrification and now RDSS, to name a few. While discom reforms have achieved limited financial success, policy reforms like payment security mechanism, power-cut penalization. Electricity Amendment Bill etc., will go a long way in enhancing efficiencies in the sector. India has already kick-started the process of privatization of power distribution in Union Territories, to usher in competition, forcing discoms to improve their performance standards and adopt a more consumer-centric approach rather than remaining geographical monopolies.

Apart from the above, the Governments Atmanirbhar push puts the country firmly on an accelerated growth plan and makes India a compelling investment opportunity for foreign capital. A huge amount of this foreign capital is expected to flow into the Indian infrastructure sector, facilitated further through InvITs and REITs.

The Union Budget for financial year 2022-23 is a step towards innovative and sustainable development in New India, to strengthen energy transition and fight climate change. The major announcements of the budget relating to power sector, included:

• Issue of Sovereign Green Bonds for mobilizing resources for green infrastructure, for use in public sector projects, which help in reducing the carbon intensity of the economy.

• Co-firing of 5-7% biomass pellets in thermal power plants, which will result in C02 savings of 38 MMT (million metric tonnes) annually. This will also provide extra income to farmers and job opportunities to locals and help avoid stubble burning in agricultural fields.

• Allocation Rs. 19,500 crore (USD 2.57 billion) for a Production Linked Incentive (PLI) scheme to boost manufacturing of highly efficient solar modules.

• Four pilot projects for coal gasification and conversion of coal into chemicals required for the industry, to evolve technical and financial viability.

• Energy efficiency and saving measures through setting up of Energy Service Company (ESCO) business model in large commercial buildings, to facilitate capacity building and awareness for energy audits, performance contracts, common measurement and verification protocol.

• Considering the space constraint in urban areas for setting up charging stations at scale, a battery swapping policy and interoperability standards, to improve the e-vehicle ecosystem.

India strives to increase its green energy production as per the Paris Agreement, with commitment to raise its Renewable Energy contribution from current 25% to 40% by 2030. On the other hand. Government has set a target of achieving 50% share of energy from non-fossil fuels and 500 GW of renewable energy by 2030. All these targets would fuel the growth of clean energy generation. The Government is providing various incentives to the power sector to ensure sustainable production through one or other scheme, such as solar roof-top programme, PM KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan), etc.

The country is in the process of introducing important energy pricing reforms in coal, oil, gas and electricity sectors, which are fundamental to further opening up of the energy market and improving its financial health. Significant steps are being taken to enhance energy security in the country by fostering domestic production, through most significant upstream reform of Indias Hydrocarbon Exploration and Licensing Policy (HELP) and building up dedicated oil emergency stocks in the form of a strategic petroleum reserve.

Energy Research, Development & Deployment (RD&D) can be a strong enabler of Indias energy policy goals, while also contributing to broader national priorities such as "Make in India". Through RD&D, the Government is working to attract global companies to produce solar PV, lithium batteries, solar charging infrastructure and other advanced technologies in India. As part of its climate policy agenda, the Government has pursued a mission-based approach in various

policy areas, including solar power and hydro power. The Government is strengthening its innovation efforts in a broad range of energy technology areas, including cooling solutions, e-mobility, smart grids and advanced bio-fuels.

Revamped Distribution Sector Scheme (RDSS)

The Central Government has notified a reforms-based and results- linked Revamped Distribution Sector Scheme (RDSS) in July, 2021, with an outlay of Rs. 3,03,758 crore over a period of five years, from FY 2021-22 to FY 2025-26, with the objective to improve quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector. The scheme aims to reduce the AT&C losses to pan-India levels of 12-15% and ACS-ARR gap to zero by 2024-25, by improving the operational efficiencies and financial sustainability of all discoms / power departments, excluding private sector discoms. REC and PFC are the nodal agencies of RDSS scheme.

It is pertinent to mention that earlier schemes of Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS) along with Prime Minister Development Package (PMDP-2015) for the erstwhile State of Jammu & Kashmir, have been subsumed in RDSS as per their extant guidelines and under their existing terms & conditions.

RDSS lays special emphasis on leveraging advanced technologies to analyze data generated through IT/OT (Information Technology and Operational Technology) devices, including system meters and prepaid smart meters, to materialize the envisaged goal i.e., introducing advanced technologies like AI/ML (Artificial Intelligence and Machine Learning) in power distribution, by leveraging partnerships and consultations.

Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

Government of Indias flagship programme, Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), for which REC is the nodal agency, has been completed in its sunset year 2021-22 i.e., on March 31,2022. The MoP had notified DDUGJY in 2014, as an integrated scheme covering all aspects of rural power distribution. The scheme had an approved outlay of Rs. 43,033 crore, including budgetary support of Rs. 33,453 crore from the Government of India. All erstwhile RE schemes (including Rajiv Gandhi Grameen Vidyutikaran Yojana i.e., RGGVY) were subsumed in DDUGJY. After March 31,2022, the DDUGJY scheme has been subsumed in RDSS. On closures, the total executed cost under the scheme has been arrived at Rs. 45,942.74 crore.

It is noteworthy that on August 15, 2015, the Honble Prime Minister had announced that all remaining 18,452 Un-Electrified (UE) villages in the country would be electrified within 1,000 days. The MoP took up the task on mission mode and assigned the work of monitoring of electrification works of UE villages to REC. These UE villages were located in highly inaccessible areas with tough terrain, extreme temperatures, areas facing right-of-way issues or areas plagued by insurgency and extremism. A new monitoring mechanism was set up and Gram Vidyut Abhiyantas (GVAs) were appointed at block/ district level. An online application,GARV App, was developed for transparent and accountable monitoring of the progress of village electrification. The commitment of Honble Prime Minister to the nation was fulfilled ahead of the deadline, with 100% electrification of all un-electrified census inhabited villages getting completed as on April 28, 2018.

Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA)

In addition to village electrification, emphasis was also laid on household electrification. The Government of India launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) scheme on September 25,2017 at a total cost of Rs. 16,320 crore, including a gross budgetary support of Rs. 12,320 crore, with the objective of achieving universal household electrification in the country. REC is the nodal agency for SAUBHAGYA scheme.

The objectives of the scheme included last mile connectivity and electricity connection to all un-electrified households in rural areas, last mile connectivity and electricity connection to all remaining economically poor un-electrified households in urban areas and Solar Photo-Voltaic (SPV) based standalone system for un-electrified households located in remote and inaccessible villages/habitations, where grid extension is not feasible or cost effective.

To expedite and monitor the electrification process under SAUBHAGYA,a web portal was launched to disseminate information about village wise household electrification status across the country. A feature named SAMVAD was provided in the portal to facilitate the general public to raise their queries and interact with officials of discoms, thus establishing transparency and accountability. A special vehicle, SaubhagyaRath, was deployed in villages/towns so that public may approach them to avail electricity connections under the scheme.

SAUBHAHYA scheme has been completed in its sunset year 2021-22 i.e., on March 31, 2022. On closures, the total executed cost of the projects has been arrived at Rs. 9,246.22 crore. It is noteworthy that 2.86 crore households have been electrified under SAUBHAGYA, DDUGJY and State Government schemes till March 31,2022.

National Electricity Fund

The National Electricity Fund (NEF) was launched in financial year 2012-13 with interest subsidy outlay of Rs. 8,466 crore, to promote capital investment in distribution infrastructure for reducing distribution losses in the country. Under the scheme, interest subsidy would be provided to the discoms over 14 years on the loans availed from banks & FIs, for distribution projects sanctioned during the financial years 2012-13 and 2013-14. Under this scheme, the utilities/ discoms both in public and private sectors, are eligible for subsidy on interest rates based on the progress achieved against reform-linked parameters.

REC is the nodal agency for operationalization of the scheme. Till March 31, 2022, interest subsidy of Rs. 1,475 crore has been released under NEF.

National Solar Mission

The National Solar Mission (NSM) was launched in January 2010 as a major initiative of the Government of India involving States, R&D institutions and industries to promote solar energy, while addressing energy security and climate change challenges of the country. The Mission is one of the several initiatives that are part of National Action Plan on Climate Change (NAPCC).

The objective of the Mission is to establish India as a global leader in solar energy, by creating the policy conditions for its large scale diffusion across the country as quickly as possible, abatement of carbon emissions and creation of direct & indirect employment opportunities for both skilled & unskilled persons. The Mission had set a target, amongst others, for deployment of grid connected solar capacity of 20 GW by 2022 to be achieved in three phases (first phase up to 2012-13, second phase from 2013 to 2017 and the third phase from 2017 to 2022). The Government revised the target from 20 GW to 100 GW on July 1,2015.

To reach 100 GW by 2022, the yearly targets from 2015 to 2016 onwards were also revised upwards. India had an installed solar capacity of 161 MW as on March 31,2010, about 2 and half months after the mission was launched on January 11, 2010. By March 31, 2015, three months before the targets were revised, India had achieved installed solar capacity of 3,744 MW. To meet the scaled up target of 100,000 MW, MNRE has proposed to achieve it through 60 GW of large and medium scale solar projects and 40 GW of solar roof-top projects.

National Wind-Solar Hybrid Policy

The Ministry of New and Renewable Energy (MNRE) issued the National Wind-Solar Hybrid Policy on May 14, 2018. The policy seeks to promote new hybrid projects as well as hybridization of existing wind/solar projects. The main objective of the policy is to provide a framework for promotion of large grid connected wind-solar photo voltaic (PV) hybrid system for optimal and efficient utilization of wind & solar resources, transmission infrastructure and land. The policy also permits the use of battery storage in hybrid projects, for optimizing output and reducing variability.

The wind-solar PV hybrid systems will help in reducing the variability in renewable power generation and achieving better grid stability. The policy provides for integration of both the energy sources, i.e., wind and solar, at AC (alternating current) as well as DC (direct current) level. The policy also aims to encourage new technologies, methods and solutions involving combined operation of wind &solar PV plants. A wind-solar plant will be recognized as hybrid, if the rated power capacity of one resource is at least 25% of the rated power capacity of the other resource.

The Central Electricity Authority (CEA) and Central Electricity Regulatory Commission (CERC) shall formulate necessary standards and regulations, including metering methodology and standards, forecasting and scheduling regulations, renewable energy certificate mechanism, grant of connectivity and sharing of transmission lines etc. for wind-solar hybrid systems.

Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan

Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme is one of the largest initiatives in the world to provide clean energy to more than 3.5 million farmers, by solarizing theiragriculture pumps.The Cabinet Committee on Economic Affairs had approved PM-KUSUM scheme in February, 2019. The scheme consists of three components:

• Component-A: 10,000 MW of decentralized ground-mounted grid-connected solar power plants

• Component-B: Installation of 20 lakh standalone solar powered agriculture pumps

• Component-C: Solarization of 15 lakh existing grid-connected agriculture pumps.

All components combined would support installation of additional solar capacity of 30.80 GW.The scheme has been expanded during

FY 2020-21 to add solar capacity of 30.8 GW by 2022. The total central financial support provided under the scheme would be Rs. 34,035 crore.

Unnat Jyoti by Affordable LEDs for All

Unnat Jyoti by Affordable LEDs for All (UJALA) is a scheme launched by the Government in January 2015 for replacement of 77 crore incandescent lamps with LED (Light-Emitting Diode) bulbs, in order to promote energy efficiency in the country. Linder the said scheme. Energy Efficiency Services Limited (EESL), joint venture of your company with other power sector PSUs, provides LED bulbs, LED tube lights and energy efficient fans to domestic consumers at a low cost, in order to save both energy and costs.

Nearly 36.86 crore LED bulbs, 72.18 lakh LED tube lights and 23.59 lakh energy efficient fans have been distributed by EESL across India. This has resulted in estimated energy savings of 48.41 billion kWh (kilowatt hours) per year with avoided peak demand of 9,788 MW, GHG (green-house gas) emission reduction of 39.22 million tonnes C02 per year and estimated annual monetary savings of Rs. 19,332 crore in consumer electricity bills. The program has been able to engage with common man in a significant scale and so far, more than 9 crore consumers have taken the benefit of using these LED bulbs, thus making it the largest non-subsidy based LED lighting program in the world. The program has been able to achieve market transformation in the domestic lighting space, as LED industry is now selling more than 70 crore LED bulbs every year.

Transparency and Online Apps etc.

Transparency has been given a key focus in all major power-sector reform initiatives taken in the recent past. The MoP has launched various apps and websites, to empower the stakeholders to track the working and performance of the Ministry as well as to track the reform initiatives taken by it. These include TARANG App, which monitors the progress of transmission system in India; Urja Mitra App, which enables the citizens to access real time and historic outage information of discoms, Vidyut Pravah App, which gives real-time information on electricity price & availability,UJALA App, which gives updates on LED bulb distribution etc.

In addition to above policies and initiatives, the Government of India has taken various steps for improving the power sector scenario, such as National Electricity Policy 2021, Mission for Enhanced Energy Efficiency, Pumped Hydro Storage Policy, Energy Conservation Building Code, National E-Mobility Programme, etc.

The Government has readied a draft of power sector reforms, including implementation of Direct Benefit Transfer (DBT) scheme in the electricity sector for better targeting of subsidies, promoting retail competition and instilling financial discipline at state-owned electricity distribution companies (discoms). These initiatives, coupled with the Governments efforts towards promoting transparency, would redefine the power sector by making it an attractive investment destination in the near future.


REC provides loan assistance for power projects and related requirements to State power utilities and private sector companies across the country, through its extensive network of pan-India offices.

Throughout its journey of more than 50 years, REC has become a major financier and accelerator of power sector development in the country. The Company also works closely with Central and State Governments for various reforms. REC acts as nodal agency, project management & project implementing agency for various schemes and programmes of the Government of India, such as RDSS, DDUGJY, SAUBHAGYA and NEF. The Company has grown leaps and bounds over the last 5 decades, not only in its size, revenue, net-worth and scope of work, but also in its impact on the nation and the lives of its people. RECs funding illuminates every fourth bulb in India.

The MoP has proactively introduced various regulatory changes, like the Electricity (Amendment) Bill 2020, draft Electricity Rights of Consumer Rules, Real Time Market Regulations and privatization of distribution & retail segment of Union Territories followed by State discoms. This decision has the potential to not only empower customers, but also to bring huge investments into the sector and accelerate technology adoption. The reforms will especially make investment in renewable energy generation, transmission and distribution more attractive to the investors, promote competition, protect the interests of consumers and facilitate electricity supply to all areas of the country, thereby contributing to development of the power sector as a whole.

Budgetary measures also support the ambitious energy transition announced by the Prime Minister, including target to achieve 500 GW and a 50% share from renewable energy by 2030 and a pledge to achieve net-zero emissions by 2070. A major focus has been laid on capturing the emerging energy transition trends, from renewables to hydrogen and even smart metering. In order to achieve these targets, the renewable energy sector needs substantial financial assistance in the form of targeted subsidies, import tariff restrictions, interest- free loans, improved tax structures and careful policy formulation for both States and discoms.

At the same time, focus and outlay for traditional areas of the energy sector like discom revival and stressed assets, has ramped up. The foremost focus on discom viability has been recognized as the sectors most critical unfinished agenda. The outcome and reforms-linked financial package of more than rupees three lakh crore for discom infrastructure upgrade, is a forward-looking plan spanning five years. This will assist distribution infrastructure development, feeder separation and smart meter installation. The reforms will also give more options to the consumers in choosing their electricity supplier by improving systemic efficiencies and enabling competitive tariffs, as will the Governments intention to increase private sector participation in distribution.

Monetization of transmission assets through InvIT model is a promising move that will help add transmission capacity, to match the rapid pace of electricity generation and demand. Expanding capitalization of SECI and IREDA, which are important organizations for the power sector, will be a huge boost for renewable energy. The proposal to make dividend payments to REIT and InvIT investors exempt from TDS and setting up a development financial institution are welcome measures to encourage investments in the power sector.

Between April 2000 to December 2021, the total FDI inflow in power sector reached USD 15.84 billion, accounting for 2.77% of the total FDI inflow in India. With the Union Budget 2022-23 focusing on transition to carbon neutral economy, policies such as allocation Rs. 19,500 crore (USD 2.57 billion) for PLI scheme to boost manufacturing of high-efficiency solar modules. Sovereign Green Bonds to mobilize resources for green infrastructure etc., provide various new opportunities.

The Government had allocated fill lakh crore to the National Infrastructure Pipeline (NIP) for FY 2019-25, out of which the energy sector accounts for 24%. The total capex projected for the infrastructure sectors during FY 2019-25 is a massive Rs. 102 lakh crore, of which conventional power and renewable energy projects will see significant outlays of Rs. 1180 crore and Rs. 930 crore respectively. While the private sector is expected to take a lead in renewable energy investments, the investments in conventional and atomic energy projects would come largely from public sector. The challenge would be to extend investment opportunities in distribution, because without a large scale overhaul of distribution infrastructure and improvement of the finances of discoms, growing generation capacity shall be redundant, and riddled with costly disputes down the line.

In the upcoming years, clean energy agenda is not only complimented by sectoral interventions but also by a balanced and strategic set of interventions across sectors such as 2,00,000 Saksham Aanganwadis powered by clean energy, 400 energy-efficient Vande Bharat trains, provision for decentralized renewable energy under vibrant village programs, special mobility zones to promote e-vehicles, policy shift to promote public mobility and transport systems implemented with cleantech and zero fossil fuel policy etc.


RECs performance and growth of its business are dependent on the performance of the overall Indian economy, with power sector in particular.

70% of Indias power demand is met by coal-fired power plants. Coal stocks at more than 100 thermal power plants in India have fallen below 25% of the required stock. The major reasons for coal shortage are increasing power demand and increasing price of gas and imported coal.The coastal thermal power plants are now generating around half of their capacity because of the sharp rise in imported coal prices. A crisis on coal front significantly affects the generation and distribution companies.

REC faces stiff competition from NBFCs as well as banks. Legal risk arises from the uncertainty of enforceability of contracts, relating to the obligations of borrowers. Interest rates are dynamic and dependent on various internal and external factors, including cost of borrowing, liquidity in the market, competitorsrates, movement of benchmarks such as AAA bond/G-Sec yields and policy changes by RBI. Further, changes in market interest rates might adversely affect the Companys financial condition.

Barriers to entry in the power sector are high, especially in the transmission and distribution segments, which are largely state monopolies. Entering the power generation business requires heavy investment initially. Other barriers are fuel linkages, payment guarantees from State Governments that buy power, shortage of inputs including natural gas, regulatory hurdles etc., which have dissuaded new entrants. This might prevent significant growth in the customer base of the Company.

Trading of solar power is one segment that has not picked up yet due to aggressive tariffs, however, this may be an opportunity in future, from the perspective of stronger payment security mechanism. Efficiency improvement measures in the sector, especially through IT enablement, promotion of environment-friendly renewable technologies and energy efficiency solutions in the coming future, are expected to provide new business opportunities.

Another cause of concern is the equity constraint faced by promoters of private sector projects, which leads to delays in project implementation and consequent cost & time overruns. The failure of borrowers in meeting their debt-related obligations may adversely impact the Companys profits, thereby creating stressed assets and impacting the ability of the Company to mobilize low cost funds. The Indian capital market is developing and maturing at a good pace and the same may cause a shift in the pattern of power sector financing. In case the borrowers start directly accessing the market, the same may affect RECs business.

The Company is also concerned about prevailing exposure norms, financial position of discoms, limited fuel availability, poor financial health of State discoms, high AT&C losses, entry of new players in the market, rising competition from banks & multilateral agencies, uncertain business environment, fluctuation in rupee, likely increase in cost of capital due to volatile market conditions, low power demand and no likely addition in conventional generation capacity in the next 5 years. Further, business and policy environment of the country has a cascading effect on the interest-rate regime, cost and availability of raw materials, gestation period and capital outlays required for power sector projects. General economic conditions may also have a direct bearing on the viability of power projects, which may affect the capacity of the borrowers to service their loans.

The Government is taking several initiatives to put power sector on a revival path, which includes addition of significant power generation capacity and improvement in coal scenario. The Company is keenly raising resources at a low cost and ensuring their deployment in avenues offering the best returns, which would be a key factor in sustainable growth and profitability of REC.


REC is a leading non-banking financial company (NBFC) categorized as Infrastructure Finance Company (IFC) by the RBI, servicing the financing needs of entire power sector value chain.

RECs principal products are interest-bearing loans to State utilities, private-sector borrowers etc. The Company does not have any separate reportable segment.

During the financial year 2021-22, the Company sanctioned total loan assistance of Rs. 54,421.76 crore towards various power sector projects and schemes. The same included Rs. 16,089.15 crore towards generation projects, Rs. 14,733.52 crore towards renewable energy projects, Rs. 21,150.79 crore towards T&D projects, including loans under Liquidity Infusion Scheme (LIS) of the Government of India under Atmanirbhar Bharat and Rs. 2,448.30 crore towards other loans such as short-term loans, medium-term loans etc.

During the financial year 2021-22, the Company disbursed total loans of Rs. 64,150.21 crore, which included Rs. 19,406.90 crore towards generation projects, Rs. 2,823.51 crore towards renewable energy projects, Rs. 16,554.23 crore towards T&D projects, Rs. 19,752.42 crore towards LIS and Rs. 4,877.68 crore towards other loans including short-term loans, medium-term loans etc. The loan disbursements also included Rs. 735.47 crore of counter-part funding under DDUGJY (including DDG component) and SAUBFIAGYA schemes of the Government of India.

Apart from the above, the Company disbursed a total subsidy of Rs. 5,317.66 crore received from the Government of India during the financial year 2021-22, which included Rs. 4,782.72 crore under DDUGJY scheme, Rs. 65.96 crore under DDG component of DDUGJY scheme and Rs. 468.98 crore under the SAUBFIAGYA scheme.


The power sector, globally as well as in India, is undergoing a sea change. This is visible in the increasing deployment of clean renewables and the rising prevalence of grid connected distributed generation. While these trends create churn and disruption in the power sector, they also create opportunities for new and innovative business models.These changes will require flexibilitythroughoutthe power sector. Most new generation capacity is likely to be renewable. Increased flexibility in generation will be required in the form of both physical (such as flexible generation, and demand response) and institutional (such as access to markets).

The transmission sector will require greater capacity to evacuate power from renewable-rich regions to the rest of the country. Digitalization of grid will enable bi-directional flow of information and power. Utility-scale energy storage, being able to act as load or as supply, will play an important role in enhancing the flexibility of the system. In India, this transition is all the more challenging because of sub-optimal condition the distribution sector. The distribution companies.asa whole.are loss-making and debt-ridden. Consequently, they are not able to invest in better infrastructure and better services to their customers, besides not being able to pay to the power generators on time. Therefore, distribution sector reforms are of utmost importance.

The history of power sector reforms tells us that India is too large and diverse for a one-size-fits-aII approach. Importing external expertise, structural frameworksand newtechnology will be required, butthese steps will not be sufficient to drive Indias power sector transition. Similarly, implementing retail choice through separation of content and carriage may not necessarily result in the full set of theoretical benefits touted. A flexible and home-grown approach to reform, which is supported by States and the Centre and which allows for learning by doing, will be instrumental in determining the success of reforms.


The performance of the Company in terms of Memorandum of Understanding (MoU) for the financial year 2020-21 signed with the holding company viz. Power Finance Corporation Limited, has been rated as "Excellent" by Department of Public Enterprises (DPE), with a perfect score of 100 out of 100 marks, the only CPSE to achieve this feat in the said year.

The Company continued its award winning performance in many areas. During the financial year 2021-22, REC was named as Indias Leading NBFC in Infrastructure Financing Category by Dun & Bradstreet at its BFSI & FinTech Awards. The Company also won the award forBest Organization for Women Empowermentat Women Achievers Awards 2021 by Exchange4Media.


The Company maintains an adequate system of internal controls including suitable monitoring procedures to ensure accurate and timely financial reporting of various transactions, efficiency of operations and compliance with statutory laws, regulations and Company policies. Suitable delegation of powers and guidelines for accounting have been issued for uniform compliance. REC also has in place its ERP operations and e-office system, to ensure IT based operations with minimum manual interventions. In order to ensure that adequate checks and balances are in place and internal control systems are in order, regular and exhaustive internal audits of various divisions and offices are conducted by in-house Internal Audit division or external professional audit firms.

Further, review audits of various regional and State offices are also conducted by the in-house Internal Audit division, for those offices where internal audit is being outsourced continuously for three years. The internal audit covers all the major areas of operations of the Company including identified critical/risk areas, as per the Annual Internal Audit Programme.The Audit Committee periodically reviews the significant findings of audits, as prescribed in the Companies Act, 2013 and in the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

As per the mandate of RBI, the Company has a Board-approved Risk Based Internal Audit (RBIA) framework in place. The RBIA framework includes independent risk assessment of the operation / activities, identification of audit universe, development of risk matrix, preparation of annual RBIA Plan and execution of internal audit as per the frequency defined in the RBIA policy.


The Company achieved impressive performance during the financial year 2021-22. The operating income of the Company on a standalone basis wasRs. 39,132.49crore, which was 11%higherthanlastyearsincome of Rs. 35,387.89 crore. The Profit Before Tax (PBT) for the financial year 2021-22 was Rs. 12,424.90 crore, which was 16% higher than last years PBT of Rs. 10,756.13 crore. Net Profit for the financial year 2021-22 stood at Rs. 10,045.92 crore, which was 20% higher than last years net profit of Rs. 8,361.78 crore. The Net Worth as on March 31, 2022 stood at Rs. 50,985.60 crore, which was 17% higher than last year.

The Company gives utmost priority to timely realization of its dues towards principal, interest, etc. During the financial year 2021-22, the Company recovered Rs. 91,681.72 crore, against the total sum of Rs. 92,696.37 crore due for recovery, including interest for Standard Assets (Stage I & II), thereby achieving a recovery rate of 98.91%.


The details of changes in key financial ratios applicable and specific to the Company, are given herein below:-

Particulars FY 2021-22 FY 2020-21
Interest Coverage ratio (times) 1.56 1.50
Debt Equity ratio (times) 6.41 7.40
Operating Profit Margin (%) 31.50 30.33
Net Profit Margin (%) 25.61 23.61
Gross Credit Impaired Assets (Stage-III) (%) 4.45 4.84
Net Credit Impaired Assets (Stage- Ill) (%) 1.45 1.71
Return on NetWorth (PAT/Average NetWorth) (%) 21.28 21.30

There was no significant change in the key financial ratios for financial year 2021-22 vis-a-vis the last financial year 2020-21. Further, the change in Return on NetWorth was also negligible.


As on March 31, 2022, total manpower of the Company was 440 employees, which included 392 executives and 48 non-executives. The industrial relations scenario continued to be on a cordial and harmonious note. During the financial year 2021-22, there was no loss of man-days on account of industrial unrest. The operations of the Company continued seamlessly despite the pandemic.

Employee training and development continued to receive key focus. Total 231 employees of the Company attended various training programmes, workshops, webinars etc. during the financial year 2021-22, achieving 466 training man-days in total.


RECs Corporate Social Responsibility (CSR) initiatives are pursued with key focus on addressing community based, societal and environmental concerns. The Company undertakes its CSR activities throughREC Foundation, a not-for-profit society.

During the year 2021 -22, the Board of Directors had approved a CSR budget of Rs. 170.67 crore, in line with the applicable provisions of the Companies Act and Rules made thereunder. Against the same, the Company spent an amount of Rs. 171.07 crore on various CSR projects during the year (including carry forward of excess spend of Rs. 3.45 crore from the previous year). Details of the CSR projects are appearing in the Boards Report.

The total amount of CSR projects sanctioned during the financial year 2021-22 aggregated to Rs. 307.17 crore, which included projects in the fields of health care (including for elderly and divyang persons), safe drinking water and sanitation facilities, employment enhancing vocational skills, education, environmental sustainability, rural development projects etc.

The disbursement towards CSR projects is linked with the achievement of predefined milestones and deliverables. The implementation of CSR projects is done in project mode with baseline survey, specific project time frame, identified milestones, periodic monitoring and impact assessment.


The Company has a comprehensive Risk Management Policy approved by the Board, covering credit risk, operational risk, liquidity risk and market risk. The Company has constituted a Risk Management Committee, the main functions of which are to identify and monitor various risks of the organization and to suggest actions for mitigation of the same. Further, the Company has appointed a Chief Risk Officer (CRO), as per the requirement of RBI norms.

The risks faced by REC have been categorized and monitored systematically. Credit risk is an inherent risk of the financing industry. It involves risk of loss arising from the diminution in credit quality of the borrower and the risk of the borrower defaulting on contractual repayments under a loan or an advance. Operational risk, on the other hand, arises from inadequate or failed internal processes, people and systems or external events. Liquidity risk is the risk of potential inability to meet the liabilities as they become due; and the inability to fund increase in assets, manage unplanned changes in the funding sources and to meet obligations when required. Market risk is defined as the risk to the Companys earnings and capital due to changes in the interest rates or prices of securities, foreign exchange changes as well as volatilities of changes.

In order to mitigate credit risk, the Company follows institutional appraisal and project appraisal processes, which include detailed appraisal methodology, identification of risks, suitable structuring and mitigation. The operational risks are measured and categorized as High Moderate or Low, through a comprehensive risk register covering all functional areas, namely business, compliance, finance, human resource, information technology, legal, operational and strategy. The Company manages its liquidity risk through a mix of strategies, including forward-looking resource mobilization based on projected disbursements and maturing obligations. Further, to mitigate market risk, the Company has an Asset Liability Management Committee (ALCO) with CMD, Whole-time Directors and senior officials as its members, which meets regularly for review. The Company also has in place an Asset Liability Management Policy and Fledging Policy.


The impact of climate change will prompt substantial structural adjustments to the global economy. Such fundamental changes will inevitably impact the balance sheets and operations of financial institutions, leading to both risks and opportunities. Massive amounts of capital and new financial products will be required to fund the transition and finance climate resilience, creating demand for banking & financial services. To effectively manage climate risks and to protect financial institutions from their potential impact, it is necessary to integrate climate risk into their financial risk management frameworks.

India has set an ambitious target of 500 GW installed renewable energy capacity by 2030 and increase the share of green energy to 50% of the total energy requirement by 2030. The sector is also looking towards push for e-mobility, promotion of energy saving devices and adoption of new and emerging technologies. At the 26th session of the Conference of Parties (COP26) to United Nation Framework Convention on Climate Change (UNFCC) in Glasgow, UK in November 2021, it was decided to cut Indias total projected carbon emission by one billion tonnes by 2030, reduce the carbon intensity of the nations economy by less than 45% by the end of the decade and achieve net-zero carbon emissions by 2070.

REC is already contributing to renewable energy financing in India. With ambitious goal of 500 GW capacity by 2030 and decision taken at COP26 summit to reduce carbon emissions, REC will continue to expand and enhance its financing efforts in the renewable energy sector.


REC aspires to emerge as the largest lender of renewable energy projects and also targets emerging opportunities in financing of e-mobility infrastructure, manufacturing of solar cells & modules, hybrid renewables and round-the-clock (RTC) projects, PM-KUSUM projects, smart-metering, smart grid, pollution control equipment and coal mining projects etc.

RECisalso looking to diversify into financing non-power infrastructure and distribution works, including through PPP and franchise models. The idea is to be not just a funding partner, but also an implementer or owner of such products or services, through itself or through its subsidiaries. REC is closely following the market and ongoing developments, so as to make apt decisions and maximize the value for stakeholders.

On the generation front, business opportunities such as powering renewable energy projects (solar, wind, small hydro, biomass), investment in large hydro projects etc. are lined up, which should see uprise in light of the Governments Hydro policy. Investment in solar roof-top projects, solar parks, grid connected solar power plants and renovation & modernization including replacement of existing power plants, is also on the cards.

TheT&D sector is gearing up for robustness to cater to 24x7 power demand of all consumers, given the success of the Governments SAUBHAGYA scheme covering universal household electrification. New investment will be required in networkaddition/augmentation. underground cabling, smart meters/equipment, advanced metering and automated meter reading infrastructure (AMI / AMR), smart grid, green corridors and new network under Tariff Based Competitive Bidding (TBCB) route. REC is watching this space to capture funding and development opportunities.

Indias discoms are a vital stakeholder group in the energy transition scene, which holds key to the future of power sector. The discom reform scheme of RDSS, attests to the importance of discom transformation efforts and REC has a key role to play in this revival. The benefits of discom turnaround driven by clean energy portfolios will stand to pay long-term dividends.

REC is also building close professional partnerships with national and international financial institutions, multilateral development organizations etc., to raise resources at competitive rates and to align with international best practices. In the upcoming years, REC will remain at the forefront of power sector development in the country and beyond.

Cautionary note

Certain statements in "Management Discussion and Analysis" section may be forward looking and are stated as required by applicable laws and regulations. Many factors may affectthe actual results, which could bedifferent from whatthe management envisages in termsof future performance and outlook.