SJVN Ltd Management Discussions.

1. Industry Overview / Industry Structure and Developments

All India installed power generation capacity as on 31.03.2021 was 3,82,151.22 MW. A capacity addition of 11,101.15 MW was targeted during the year 2020-21 comprising 10,591.15 MW of thermal and 510 MW of hydro power and capacity addition of 5,436.15 MW comprising 4,926.15 MW of thermal and 510 MW of hydro power was achieved up to 31.03.2021.

Industry scenario indicates that there is ample opportunity for consistent growth of business in hydro, renewable and thermal energy sector in the times to come with growth in demand. Company is developing

1320 MW super-critical thermal power project at Chausa, District Buxar in Bihar, 900 MW Arun-3 HEP in Nepal, 60 MW Naitwar Mori HEP in Uttarakhand, 600 MW Kholongchhu HEP in Bhutan, 210 MW Luhri Stage-I HEP and 66 MW Dhaulasidh HEP in Himachal Pradesh.

As regards hydro potential, India has an estimated hydro power potential of about 1,50,000 MW out of which only about 46,209.22 MW (as on 31.03.2021) has been commissioned. The bulk of the unharnessed potential is located in the hill states/UTs of Arunachal Pradesh, Uttarakhand, Himachal Pradesh, Sikkim and Jammu & Kashmir. The above industry scenario signifies that there is ample opportunity for consistent growth of business in hydro sector in near future.

2. SWOT Analysis

A. STRENGTHS:

SJVN has the following strengths:

SJVN has gained wide experience and expertise in development of large hydro power projects from concept to commissioning including operation & maintenance and management of silt during project operation. SJVN has in-house ‘State of art hard coating facility installed at one of the power stations.

SJVN has in-house capability for complete design of mega hydro power projects, large value contract award, and contract & project management.

SJVN has efficient plant operation expertise with minimal down time of machines and maximizing the Plant Availability Factor.

SJVN has stable revenue stream through long term power purchase agreements with distribution licensees. The allocation of power from its power stations is made as per PPAs and by the Ministry of Power, Government of India.

Historical financial performance and steady cash flows years make SJVN capable of funding the pipeline of projects.

SJVN is lean and thin organization high manpower productivity in terms of profit per employee.

SJVN has competent and committed workforce. SJVN fully recognize that the contribution of its employees is integral to the achievement of its ambitious plans and has thus adopted an organizational philosophy which acknowledges and rewards their contributions.

SJVN has effective implementation of National R&R policies and excellence in CSR activities.

SJVN has dynamic leadership and effective Corporate

Governance.

B. OPPORTUNITIES:

The unharnessed hydro potential of 1,03,791 MW (as on 31.03.2021) primarily located in the hill states/UTs of Arunachal Pradesh, Uttarakhand, Himachal Pradesh, Sikkim and Jammu & Kashmir.

SJVN is diversifying into alternate energy sources such as Wind & Solar Energy and Power Transmission. SJVN is constantly striving to expand its base both in National and International arena.

C. WEAKNESSES:

NJHPS and RHPS are cascade schemes and operating in tandem. Any difficulties faced in the operation of NJHPS will have direct consequences on power generation of RHPS.

Inadequate powers to incur expenditure on pre-construction activities and business developments / investment before establishing project viability.

D. THREATS:

Most of the hydro-electric projects are located in remote locations and are prone to natural calamities such as cloud burst, land slide, road block etc. These natural calamities also contribute to delays, unforeseen events.

Stringent norms and cumbersome procedures for getting environment clearance, forest clearance and clearance from National Board for Wild Life (where ever applicable) delay the commencement of construction of projects.

In spite of extensive survey and investigations, the probability of geological surprises in various components of hydroelectric projects in young Himalayan ranges pose great technical challenge involving extremely cost intensive and time consuming measures.

Increase in cost of land after introduction of new Land Acquisition Act is making hydro power projects more cost intensive and thus higher tariff.

With the tariffs of solar and wind power projects going down, development of hydro power projects, which is the core strength of SJVN, is becoming increasingly less viable.

3. OUTLOOK

Measures adopted by SJVN in Operation and Maintenance of 1500 MW NJHPS and 412 MW RHPS have improved our capability in efficient Operation and Maintenance of Power Stations.

4. RISKS AND CONCERNS

Hydro Power Projects are capital intensive and have long gestation period. The rising cost of Hydro Projects on account of land compensation and delays leads to higher power tariff and has resulted into shift of emphasis from Hydro to cheaper alternate energy sources. Water being a state subject, obligation of free power and other incentives to State Governments is leading to higher tariff. over the Risk Management Policy of SJVN was approved by the Board on September 12, 2013. The Policy has been duly supplemented with separate and comprehensive Risk Management Plans for each project duly approved by the Board.

The main objective of risk management is to identify all the business related activities followed by activity related potential risks followed by identification of various triggers and other factors associated with risks and their mitigation measures to overcome them with minimum effect to business.

The Risk Management Policy has been disclosed on the website of the company and may be accessed at Investor Relation Section on SJVN website www.sjvn.nic.in

5. RISK MANAGEMENT FRAMEWORK

The risk management framework entails formulation of a Risk Matrix to assign the likelihood of occurrence to the assigned risks along with definition of nature of risk viz., controllable, uncontrollable and partly controllable, suggesting mitigation mechanism and lead responsibility centre. The risk management policy has a defined Risk Organization Structure with Chief Risk Officer at the helm supported by Risk Controller along with Risk Managers and Risk Officers performing the line functions.

The Risk Management Strategy includes assessment of risk to designate as falling under Avoidance, Transfer, Reduction or Retention with associated action plan.

FINANCIAL DISCUSSION AND ANALYSIS

A detailed financial discussion and analysis is furnished below on the Audited Financial Statements of the company for the financial year 2020-21 vis-a-vis financial year 2019-20.

Notes referred in below paragraphs are part of the Standalone financial statements for the financial year 2020-21 placed elsewhere in this report.

During the year, the Company has retrospectively restated/reclassified certain items in the Financial Statements of the previous periods. Accordingly, company has restated its Balance Sheet as at 31st March 2020 and 1st April 2019 (beginning of the preceding period) and Statement of Profit and Loss and year ended 31st March 2020 to comply with the requirement of the applicable Accounting Standards i.e. Ind AS 8 and Ind AS 1 impact of the same has been disclosed in Note No 2.41 & 2.42.

Figures of previous years have been regrouped/ rearranged wherever necessary.

A. RESULTS OF OPERATIONS

1. INCOME:

F.Y. 2020-21 F.Y. 2019-20
Units of Electricity Generated (Million Units) 9223.49 9678.15
INCOME Rupees in Crore
1. Revenue from Operations
a) Energy Sales 2448.07 2419.79
b) Consultancy Income 5.44 11.22
c) Other Operating Revenues 37.32 276.60
Total Revenue from Operations 2490.83 2707.61
2. Other Income
a) Interest
- On deposits ,advances to employees, contractors and Others etc. 123.92 230.43
b) Late Payment Surcharge from 584.16 107.29
Beneficiaries
c) Others 14.16 49.91
Total Other Income 722.24 387.63
Total Income 3213.07 3095.24

The income of the Company comprises of income from sale of electricity, interest & late payment surcharge received from beneficiaries, consultancy, interest earned on investment of surplus funds etc. The gross income for financial year 2020- 21 is 3213.07 crore as compared to 3095.24 crore in the previous year registering an increase of 3.81% .The increase in gross income is mainly due to increase in Late Payment Surcharge from Beneficiaries by 476.87 crore after amendment to regulation 59 of CERC notification dated 19.02.2021 .

Tariff for computation of sale of energy

The sale of Hydro Power by the Company is governed by the tariff fixed by the Central Electricity Regulatory Commission (CERC) pursuant to the tariff policy issued by the Govt. of India. The Central Electricity Regulatory Commission (CERC) has notified the Tariff Regulations, 2019 containing inter-alia the terms & conditions for determination of tariff, applicable for a period of five years with effect from 01.04.2019. Tariff is determined with reference to Annual Fixed Charges (AFC) which comprises of Return on Equity (ROE), Depreciation, Interest on Loan, Interest on Working Capital and Operation & Maintenance Expenses. ROE is grossed up with effective income tax rate of the respective financial year so as to recover the income tax incidence. For the purpose of recovery, AFC is bifurcated into two equal parts i.e. Energy Charges and Capacity Charges. Recovery of Energy

Charges is dependent upon energy generated and full recovery is ensured when schedule design energy level is achieved. Generation over and above design energy entitles for additional revenue in the form of secondary energy charges as well as incentive by way of deviation charges where the Power Station of the Company contribute towards maintaining grid stability. Recovery of capacity charges is dependent on the actual availability of plant for generating power with reference to Normative Annual Plant Availability Factor (NAPAF), which has been fixed at 90% for Nathpa Jhakri Hydro Power Station (NJHPS) and 85% for Rampur Hydro Power Station (RHPS) for the F.Y. 2021. Company is entitled to receive incentives for achieving higher Plant Availability Factor against NAPAF. The sales also include reimbursement on account of Foreign Exchange Rate Variation (FERV).

Revenue from operations also includes sale of power from Wind and Solar

Power projects situated in the States of Maharastra and Gujarat. The rates of sale of energy is regulated as per Power Purchase Agreement (PPA) Statement of Cash Flows for the signed with the respective state government utilities.

Revenue from Operations (Note 2.31) Energy Sales

Company sells electricity to bulk customers comprising mainly, Electricity Utilities owned by State Governments and private distribution companies. Sale of electricity is generally based on long term Power Purchase Agreements (PPAs) entered with such Utilities. Sales for the financial year 2020-21 have been provisionally recognized at 2448.07 crore as compared to 2419.79 crore during the financial year 2019- 20.

Energy sales include an amount of 56.35 crore (previous year 8.52 crore) pertaining to earlier years.

Pending approval of tariff by CERC, sales for the year in respect of hydro power stations have been recognized in accordance with the tariff approved and applicable as on 31.03.2019 as provided in the CERC (Terms and Conditions of Tariff) Regulations 2019.

Sales includes an amount of 191.85 crore (previous year 192.80 crore) on account of capacity incentive in respect of hydro power stations mainly due to achievement of higher plant availability factor as compared to Normative Plant Availability Factor. Gross Annual Generation for the current year was lower as compared to previous year due to decrease in water discharge.

As per the directions of the Govt., Company has given one-time rebate of 57.82 crore to the DISCOMs and Power Departments of States/Union Territories. Accordingly rebate amounting to 51.73 crore (previous year 6.09 crore ) has been recognised as an exceptional item.

The details of Generation & Plant Availability Factor (PAF) are given below:

NJHPS RHPS
Particulars 2020-21 2019-20 2020-21 2019-20
Design Energy (MUs) 6612 6612 1878 1878
Gross Generation (MUs) 7098.93 7445.43 1995.33 2098.03
Normative PAF (%) 90 90 85 85
Actual PAF (%) 105.38 105.48 104.80 104.88

Sales also includes Unscheduled Interchange (UI) Charges amounting to 28.14 crore (previous year 16.55 crore) for the positive deviation in generation with respect to schedule, (payable or receivable) at rates notified by CERC from time to time.

Revenue from Wind/Solar Power Projects:

The revenue from sale of power from Renewal Projects (Wind and Solar Power) has decreased by 2.22 crore due to decrease in generation of Wind and Solar Power by 5.46 MUs (current year 129.23 MUs) (Previous year: 134.69 MUs).

Consultancy

Revenue from operations also includes an amount of 5.44 crore (Previous Year 11.22 crore) towards consultancy charges. Consultancy for the year was provided to SJVN Arun-3 Power Development Company Pvt. Ltd. (SAPDC), Nepal. During the previous year consultancy was also provided to Teesta Urja Limited in addition to SAPDC,Nepal.

Other Operating Revenue:

Other Operating Revenue mainly includes Interest from beneficiaries. CERC regulations provide that if the tariff already recovered is less than the tariff approved by the CERC, the company shall recover the balance amount along with interest from the beneficiaries. costs decreased by Accordingly, the interest from the beneficiaries amounting to 34.70 crore ( previous year: 275.57 crore) has been recognised after the truing up/ finalisation of tariff by CERC.

Revenue from operations for F.Y. 2020-21 constitutes 77.52% of total income as compared to 87.48% for F.Y. 2019-20.

Other Income (Note 2.32)

Other income mainly comprises of interest income on short term deposits with banks, late payment surcharge, interest from employees and contractors etc. Other income for the year has increased by 334.61 crore to 722.24 crore as compared to 387.63 crore during previous year registering an increase of 86.32%. This is mainly on account of increase in late payment surcharge from beneficiaries by 476.87 crore amounting to 584.16 crore (Previous year 107.29 crore) partly offset by decrease in interest income. Decrease in interest income by 91.37 crore (current year 113.48 crore & previous year 204.85 crore) is due to reduction in corpus of surplus funds and interest rates. of tariff except for by CERC for

Major components of other income is as under:

(Rs. in Crore)

Income Financial Year 2020-21 Financial Year 2019-20
Interest from Banks 113.48 204.85
Late Payment Surcharge from Beneficiaries 584.16 107.29
Other Miscellaneous Income (Including Liquidated Damages , excess provision/ sundry credit balances written back, receipt of maintenance of ICF, Interest from Employees, Contractors, Others and foreign currency fluctuation adjustment) 24.60 75.49
Total Income 722.24 387.63

2. EXPENDITURE

(Rs. in Crore)

Expenditure Financial Year 2020-21 Financial Year 2019-20
Employee Benefits Expense (Note 2.33) 320.55 307.68
Finance Costs (Note 2.34) (2.85) 268.07
Depreciation and Amortisation (Note 2.35) 393.27 384.09
Other Expenses (Note 2.36) 368.82 362.89
Total Expenditure 1079.79 1322.73

The total expenditure of the Company has decreased by 18.37% to 1079.79 crore in the financial year 2020-21 from 1322.73 crore in financial year 2019-20 mainly on account of decrease in finance 270.92 crore. Total expenditure as percentage of total income during the F.Y. 2020-21 was 33.61% as compared to 42.73% during the F.Y. 2019-20.

Employee Benefits Expense

The Employee Benefits Expense includes Salaries and Wages, Allowances, Incentives, Contribution to Provident & Other Funds and Welfare Expenses. These Expenses accounted for 29.69 % of total expenditure in F.Y. 2020-21 as compared to 23.26 % in F.Y. 2019-20.

The Employee Benefits Expense during the year was 320.55 crore (previous year 307.68 crore) i.e. marginal increase of 12.87 crore in comparison to the previous year.

Finance Costs

The Finance Cost mainly consists of interest on Rupee Term Loans, Foreign Currency Loans, and Guarantee Fees etc. The borrowings are denominated in rupees, including those in foreign currencies, for accounting purposes.

During the current financial year, finance 270.92 crore (current year (2.85) crore, previous year 268.07 crore). This is mainly due to decrease of Exchange Rate as on 31.03.2021 on foreign currency loans (decrease in foreign currency rate from 76.20 (31.03.2020) to 73.91 (31.03.2021). However, there is no impact on the profitability been accounted for as movement in regulatory deferral account balance. Interest on foreign/domestic borrowings also decreased by 41.16 crore (current year 27.88 crore & previous year 69.04 crore) due to decrease in rates of foreign currency borrowings and swapping of domestic loan by lower interest bearing loan.

Depreciation and Amortisation Expenses

As per the Accounting Policy of the Company, depreciation is charged on assets of operating units on straight line method following the rates & methodology notified by Central Electricity Regulatory Commission (CERC) for the purpose of fixation of tariff in accordance with Schedule-II of the Companies Act, 2013. Depreciation on assets other than operating units of the company is charged to the extent 90% of the cost of the fixation assetfollowing the rates notified some items for which depreciation is charged at the rates assessed by the company.

The depreciation cost has marginally increased by 9.18 crore (C.Y. 393.27 crore; P.Y. 384.09 crore). This is mainly due to charging of depreciation on additional assets capitalized during the year.

Depreciation represents 36.42% of our total expenditure during F.Y. 2020- 21 in comparison to 29.04% during F.Y. 2019-20.

Other Expenses

Other Expenses comprises mainly of Repair & Maintenance of Buildings, Roads, Electromechanical works and Plant & Machinery, Insurance, Security, CSR Expenses, interest of arbitration awards, interest payable to beneficiaries and other administrative expenses. Other Expenses represents 34.16% of total expenditure during F.Y. 2020-21 in comparison to 27.43% during F.Y. 2019-20. In absolute terms the expenses were 368.82 crore in F.Y. 2020-21 as compared to 362.89 crore during previous year. This is marginally higher by 5.93 crore as compared to previous year. The increase is mainly due to additional provision of interest on arbitration awards.

Exceptional Items (Note 2.37)

During the year an arbitration award has been received in respect of Nathpa Jhakri Hydro Power Station (NJHPS). The company has filed an appeal before the Honble High Court against the award. However, a provision has been made as per the policy of the company and an amount of 166.06 crore including interest during construction period has been capitalized. Interest after construction period on this award has been charged to profit & loss as exceptional item and other expenses amounting to 241.71 crore and 16.11 crore respectively. During the year ,the company has also given a special rebate of 51.73 crore (previous year 6.09 crore) to the beneficiaries in line with the directions of GoI and the same has been recognized as an exceptional item. cost by

Net Movement in Regulatory Deferral Account Balance (Note 2.38)

The company is mainly engaged in generation and sale of electricity. The price to be charged by the company for electricity sold from hydro power projects to its customers is determined by the CERC which provides guidance on the principles and methodologies for determination of the tariff. The tariff is based on allowable costs like interest, depreciation, operation & maintenance expenses, etc. with a stipulated return on equity. As per the CERC Tariff regulations any gain or loss on account of exchange rate variation during the construction period shall form part of the capital cost till the declaration of commercial operation date. Exchange differences arising from settlement/translation of monetary item denominated in foreign currency to the extent recoverable from or payable to beneficiaries in subsequent periods as per CERC Tariff Regulations are recognized on an undiscounted basis as regulatory deferral account debit/credit balance and adjusted from the year in which the same becomes recoverable from or payable to the beneficiaries. The same is accounted for as per Ind AS 114- ‘Regulatory Deferral Accounts.

Accordingly, an amount of (86.77) crore (Previous year 150.94 crore has been accounted as FERV and debited to Regulatory Deferred Account Debit Balance.

Pay of employees of CPSEs has been revised from 1st January, 2017. CERC Tariff regulations 2014-19 provides that the impact of actual increase in employee cost on account of pay revision of operational power stations is recoverable from beneficiaries in future through Tariff. Accordingly, additional expenditure on employee benefit on pay revision to the extent charged to the Statement of Profit & Loss or to the Other Comprehensive Income and recoverable from beneficiaries in subsequent periods as per Tariff Regulations amounting to 43.13 crore (Previous year 42.00 crore) has been recognized as Regulatory Income.

During the year, the company has received an arbitration award in respect of Nathpa Jhakri Hydro Power Station (NJHPS). Accordingly the principal amount of award including Interest during construction period has been before tax, capitalized and interest after construction period on this award has been charged to profit & loss. The interest charged to profit & loss has been included in movement in regulatory deferral account balance as the same is recoverable from beneficiaries through tariff in future.

O&M expenses excluding security expenses are fixed by CERC in tariff regulations 2019-24. Accordingly, the difference in O&M expenses including security expenses allowed by CERC for the period 2019-20 and 2020-21 amounting to 114.65 crore has been accounted for as movement in regulatory deferral account balance. recognizedAccordingly, for the financial in the statementofProfitandLossonaccountof benefits FERV,employee expense, O&M expenses and interest on arbitration awards together amount to 328.83 crore (Previous year 192.94 crore).

3. PROFIT BEFORE TAX

Profit before tax increased by 10.68 % to 2168.67 crore during F.Y. 2020-21 as against 1959.36 crore during previous year due to the reasons explained above.

4. TAX EXPENSES:

Current Tax Expense

The Company recognises tax on income in accordance with provisions of Income Tax Act. During the year, the Company is liable to pay tax equivalent to Minimum Alternate Tax (MAT) .The Current Tax for the year is 373.72 crore as compared to 340.53 crore during previous year. The increase in tax incidence is due to increase in Profit before tax.

Deferred Tax (Note 2.8)

Deferred tax for the year is on account of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. During the year, company has recognised the deferred tax on account of Minimum

Alternate Tax (MAT) paid in earlier years, the benefit of which is likely to be available in future years. Accordingly, an amount of 161.91 crore has been recognised as deferred tax during F.Y. 2020-21 as against (110.52) crore during the F.Y. 2019-20. Deferred tax has increased by 272.43 crore.

During the previous year deferred tax was lower due to recognition of same on Advance Against Depreciation pertaining to earlier years amounting to 281.69 crore.

5. OTHER COMPREHENSIVE INCOME

The Other Comprehensive Income (OCI) is on account of remeasurement of net defined benefit liability/asset in respect of employees. OCI net of tax for the financial year 2020-21 is (1.66) crore in comparison to (14.20) crore during financial year 2019-20.

6. CASH FLOWS

Cash & cash equivalents and cash flows on various activities are given below: (Rs. in Crore)

r>
Particulars F.Y. 2020-21 F.Y.2019-20
Opening cash & cash equivalent 248.23 35.01
Net cash from operating activities 2010.32 1998.74
Net cash used in investing activities (1227.76) (440.09)
Net cash flowfrom financing activities (1042.37) (1345.43)
Net increase/(decrease) in cash and cash equivalent (259.81) 213.22
Closing cash and cash equivalents (11.58) 248.23

Statement of cash flows includes cash flows from operating, investing and financing activities.

Net cash generated from Operating Activities was 2010.32 crore during the year 2020-21 (Previous year 1998.74 crore). The increase is mainly due interest from term deposits and partly offset toincreaseinprofit by decrease in finance cost and adjustment for assets and liabilities such as regulatory deferral accountdebitbalanceandloanandotherfinancial assets.

Net cash from investing activities was (1227.76) crore as compared to (440.09) crore in the previous year. Expenditure in investing activities is mainly on Property, Plant & Equipment, Capital Work in progress and investment in subsidiary & joint venture companies etc., net off by cash inflows from encashment of Term Deposits and interest on Term Deposits from banks. Increase in investing activities is mainly due to increase of investment in subsidiaries & Joint venture companies by 612.35 crore (current year 1853.90 crore) (previous year 1241.55 crore). There is also increase in investment in Property, Plant & Equipment and Capital Work in progress etc. by 162.25 crore (current year 554.87crore) (previous year 392.62 crore).

During the year the company used net cash of 1042.37 crore for financing activities (Previous year 1345.43 crore) as detailed below: Borrowings amounting to 183.01 crore was raised during the year as compared to 105.99 crore during the previous year and borrowings amounting to 238.74 crore was repaid in the year 2021 (Previous year 218.64 Crore). In the year 2021, cash outflow on account of payment of dividend including interim dividend thereon was 903.69 crore (Previous year 1111.83 crore). Interest & Finance charges paid during the year was 78.71 crore (Previous year 106.79 crore).

B. FINANCIAL POSITION

During the year, the Company has retrospectively restated/reclassified certain items in the Financial Statements of the previous periods. Accordingly, company has restated its Balance Sheet as at 31st March 2020 and 1st April 2019 (beginning of the preceding period) and Statement of Profit and Loss and Statement of Cash Flows 31st March 2020 to comply with the requirement of the applicable Accounting Standards i.e. Ind AS 8 and Ind AS 1 (impact of the same has been disclosed in Note No 2.41 & 2.42 to the Standalone financial statements placed elsewhere in this report.

The items of the Balance Sheet are as under:

ASSETS :

1. Non-Current Assets

(Rs. in Crore)

As at March 31,
Particulars 2021 2020
Property, Plant and Equipment (Note 2.1) 7470.88 7569.38
Capital Work-in-progress (Note 2.2) 1201.89 913.01
Intangible Assets (Note 2.3) 27.58 1.38
Intangible Assets Under Development (Note 2.4) 4.89 31.87
Financial Assets
- Investments (Note 2.5) 3462.14 1972.99
- Loans (Note 2.6) 81.91 67.83
- Others (Note 2.7) 455.27 50.00
Deferred Tax Assets (Net) (Note 2.8) 622.72 784.63
Other Non-Current Assets (Note 2.9) 249.26 206.92
Total 13576.54 11598.01

Non-Current Assets has increased by 17.06% to 13576.54 crore (Previous year 11598.01 crore ).

Property, Plant and Equipment (PPE)

PPE includes Net Block after depreciation in respect of Land, Buildings, Roads & Bridges, Plant & Machinery, Generating Plant & Machinery, Electrical Works, Hydraulic Works (Dams, Tunnels etc.), Vehicles, Electrical/Office Equipments, Furniture/Fixtures, Data Processing Equipments etc. Gross Block of PPE during the year increased by 276.64 crore to 10346.55 crore (Previous year 10069.91 crore). The increase is mainly due to capitalisation of Power House Building after receipt of arbitration award in respect of NJHPS, Capital Spares and acquisition of Land for Luhri Project (Stage-I) during the year. However, Net Block of PPE decreased by 98.50 crore to 7470.88 crore at the end of current year (Previous year 7569.38 crore) due to charging of depreciation on PPE during the year.

Capital Work-in-progress

Capital Work-in-progress during Current year registered an increase of 31.64% to 1201.89 crore (Previous year 913.01 crore) mainly due to increase in Capital work-in-progress of Naitwar Mori and commencement of construction work of Luhri hydroelectric project etc.

Intangible Assets and Intangible Assets under Development

Intangible Assets & Intangible Assets under Development is on account of SAP/ERP Software. Net block of both Intangible Assets & Intangible Assets under Development at the end of Current year is 32.47 crore (previous year 33.25 crore).

Non-current Financial Assets Investments

Investments are intended for long term and carried at cost which consists of investments in Subsidiaries and Joint Venture Companies. Total Investments at the year end is 3462.14 crore (Previous year 1972.99 crore). The increase in investments is due to infusion of equity in Subsidiaries and Joint Venture companies.

Loans

Non-Current Loans are those loans which are expected to be realised after 12 months from the balance sheets date. These loans mainly include, loans and advances given to employees at concessional rates and have been fair valued at reporting date. Loans at the end of current year is 81.91 crore (Previous year 67.83 crore). The increase is mainly due to increase in loans of employees.

Others

Other Non-current Financial Assets includes Share application money pending allotment in subsidiaries and Bank Deposits with more than twelve months maturity. Other Non-current Financial Assets at the end of current year is 455.27 crore (Previous year 50.00 crore). This is mainly due to increase in Share application money paid to subsidiary companies.

Deferred Tax Assets (Net)

The net deferred tax assets decreased by 161.91 crore (current year 622.72 crore, previous year 784.63 crore). The decrease is mainly due to materialisation/use of deferred tax assets on account of MAT credit entitlement and carrying amount of PPE during the year. Net decrease in deferred tax assets amounting to 161.91 crore during the year has been debited to statement of profit and loss (previous year netincrease 110.52 crore had been credited to statement of profit and loss).

Other Non-current Assets

Other non-current assets mainly consist of advance tax & tax deducted at source net off by provision for tax, Capital Advances given to Contractors, govt deptt / organisations mainly for acquisition of land for Luhri (Stage-I), Devsari Hydro Electric Project and deferred employee benefits etc. Other non- current assets at the end of Current Year is 249.26 crore (Previous year 206.92 crore).

2. Current Assets

(Rs. in Crore)

As at March 31,
Particulars 2021 2020
Inventories (Note 2.10) 56.15 49.49
Financial Assets
-Trade Receivables (Note 2.11) 522.96 745.44
-Cash and Cash Equivalents (Note 2.12) 40.60 248.23
-Bank Balances Other than cash and cash equivalents (Note 2.13) 901.99 1963.39
-Loans (Note 2.14) 20.87 17.79
-Others (Note 2.15) 734.66 497.16
Other Current Assets (Note 2.16) 148.10 123.85
Total 2425.33 3645.35

Current Assets as on March 31, 2021 has decreased by 33.47 % to 2425.33 crore (Previous year 3645.35 crore).

Inventories

Inventories mainly comprise stores & spares which are maintained for operating plants. Inventories are valued at lower of cost arrived at on weighted average basis and net realisable value. Inventories were valued at 56.15 crore as on 31st March, 2021 (Previous year 49.49 crore).

Financial Assets Trade Receivables

Trade Receivables mainly consists of receivables on account of Sale of Energy.

Trade receivable does not include unbilled revenue which has been shown separately under other current financial assets (Note 2.15). Trade Receivables during the Current year has decreased by 29.85 % to 522.96 crore (Previous year 745.44 crore). Trade receivable has decreased due to realisation of arrears of tariff. As per the arrangements between the company, banks and beneficiaries, the bills of beneficiaries amounting to 201.07 crore (previous year: 150.00 crore) have been discounted during the year. Accordingly, Trade Receivables have been disclosed net off bills discounted. Trade Receivables are 21.56% of current assets.

Cash and Cash Equivalents & Bank Balances other than cash and cash equivalents

Cash and Cash Equivalents & Bank Balances other than cash and cash equivalents include mainly balances in Term Deposits and surplus in current account. Cash and Cash Equivalents & Bank Balances other than cash and cash equivalents during the current year decreased by 1269.03 crore to 942.59 crore (Previous year 2211.62 crore). The decrease is mainly due to investment in subsidiaries and joint venture companies.

Cash and Cash Equivalents & Bank Balances other than cash and cash equivalents are 38.86 % of current assets.

Loans

Current loans during the year has increased by 3.08 crore to 20.87 crore as on 31.03.2021 (Previous year 17.79 crores) mainly due to increase in loans to employees.

Other Financial Assets

Other financial assets include interest accrued but not due on deposits with Banks, amount recoverable from Contractors & Suppliers , Unbilled Revenue and amount receivable for late payment surcharge etc. Other financial assets increased by 237.50 crore to 734.66 crore during current year (Previous year 497.16 crore). The increase is mainly due to amount receivable for late payment surcharge from beneficiaries.

Other Current Assets

Other Current Assets mainly include advances to Govt. Departments other than capital advances and prepaid expenses etc. Other Current Assets increased by 24.25 crore to 148.10 crore during current year (Previous year 123.85 crore).

Regulatory Deferral Account Debit Balance

Expense/Income recognised in the Statement of Profit & Loss to the extent recoverable from or payable to the beneficiaries in subsequent periods as per CERC tariff regulations are recognised as “Regulatory deferral account balances” as per the provisions of Ind AS 114-Regulatory Deferral Accounts.

Regulatory deferral account balances are adjusted from the year in which the same become recoverable from or payable to the beneficiaries.

Regulatory deferral account balances include foreign exchange rate variation on foreign currency loans, employee benefit expense on account of pay revision w.e.f. 01.01.2017, interest on arbitration awards etc. Regulatory deferral account debit balance at the year-end is 861.70 crore (Previous year 532.87 crore). The increase is mainly due to accounting of interest on arbitration awards received during the year in respect of Nathpa Jhakri Hydro Power Station (NJHPS). This amount is recoverable from beneficiaries through tariff in future.

EQUITY AND LIABILITIES

1. TOTAL EQUITY

Total Equity of the Company at the end of the financial year 2020-21 has increased to 12761.84 crore from 12034.31 crore in the previous year registering an increase of 6.05% as per details given below:

(Rs. in Crore)

Particulars Total Equity
Opening Balance as on 01.04.2020 12034.31
Add: Profit for the year 1633.04
Less: Other Comprehensive Income 1.66
Less: Dividend 903.85
Balance as on 31.03.2021 12761.84

to 32.47 as at 31st March, 2021 (Previous year 30.62 per share).

2. LIABILITIES

Non-Current Liabilities

Financial Liabilities

(Rs. in Crore)

As at March 31,
Particulars 2021 2020
Borrowings (Note 2.20) 1855.68 1972.19
Lease Liabilities (Note 2.21) 9.17 12.57
Other Financial Liabilities (Note 2.22) 0.01 0.01
Provisions (Note 2.23) 96.58 85.49
Other Non-current Liabilities (Note 2.24) 751.99 784.64
Total 2713.43 2854.90

Borrowings

Total borrowings as on March 31, 2021 were 1855.68 crore as against 1972.19 crore as on March 31, 2020. Over the last year, Borrowings excluding current maturities of long term debts have registered a decrease of 5.91 % amounting to 116.51 crore. Out of these 366.80 crore (previous year 228.47 crore) is Secured and 1488.88 Crore (previous year 1743.72 crore) is Unsecured. Secured Loans are borrowed from HDFC Bank & Punjab National Bank and Unsecured Loans are on account of borrowing in foreign currency from World Bank. During the year an amount of 183.01 crore has been borrowed from Punjab National Bank for Naitwar Mori Hydroelectric Project. The Unsecured Loans have registered a decrease of 14.61% amounting to 254.84 crore during current year. The decrease is due to repayment of loans. During the year, the company has swapped the secured loan of Axis bank with lower interest bearing loan from HDFC Bank.

Above borrowings do not include an amount of 247.00 crore (Secured 44.56 crore and Unsecured 202.44 crore) being current maturities of long term debts payable duringnextfinancialyear. The same has been shown under Other Current Financial Liabilities.

The debt to equity ratio (inclusive of Current Maturities of Long Term Borrowings and accrued interest) at the endoffinancialyear 2020-21 of the company is 0.17 (previous year 0.19).

Lease and Other Financial Liabilities

The lease liabilities are on account of assets taken on lease by the company. The lease liabilities have been measured at the present value of the remaining lease payments. Lease liabilities during the current year is 9.17 crore (Previous year : 12.57 crore).

Other Financial liabilities include Retention Money from Contractors and others. Other financial liabilities during the current year is 0.01 crore (Previous year 0.01 crore).

Non-current Provisions

Non-current Provisions are on account of long term employee benefits provided on the basis of Actuarial Valuation and includes leave encashment and Other Retirement Benefits which are expected to be settled beyond a period of twelve months from the balance sheet date. Non-current provisions increased by 11.09 crore to 96.58 crore during current year (Previous year 85.49 crore). Disclosures as per Ind AS- 19 “Employee Benefits” are given in Note No.2.43 to the financial statements.

Other Non-current Liabilities

Other non-current liabilities include income received in advance (Advance against Depreciation (AAD) and Deferred Foreign Currency Fluctuation Liability etc.

Other non-current liabilities have registered a decrease of 32.65 Crore to 751.99 crore (Previous year 784.64 crore) as an amount of 32.25 crore on account of AAD has been transferred to other current liabilities as the same is adjustable in sales duringnextfinancialyear.

Current Liabilities

Financial Liabilities

(Rs. in Crore)

As at March 31
Particulars 2021 2020
Borrowings (Note No.2.25) 52.18 --
Lease Liabilities (Note 2.26) 8.80 9.64
Trade Payables (Note 2.27) 42.33 32.27
Other Financial Liabilities (Note 2.28) 709.96 585.12
Other Current Liabilities (Note 2.29) 77.53 46.38
Provisions (Note 2.30) 497.50 213.61
Total 1388.30 887.02

The Current Liabilities as at March 31, 2021 and 2020 were 1388.30 crore and 887.02 crore respectively. The Current Liabilities have increased by 56.51 % mainly due to increase in Other Financial Liabilities and Provisions.

Borrowings

During the year company has availed the bank overdraft to finance the short term fund requirements/outstanding balance of borrowings at the end of the year is 52.18 crore (Previous year: Nil).

Lease Liabilities

Lease liabilities at the end of year is 8.80 crore (Previous year: 9.64 crore).

Trade Payables

Trade payables include liabilities in respect of amount due on account of goods purchased or services received in normal course of business operations other than liability for Purchase/ Construction of Fixed Assets. Trade Payables at the end of current year is 42.33 crore (Previous year 32.27 crore).

Other Financial Liabilities

Other Financial Liabilities mainly include Current Maturities of Long Term Debts payable within Twelve Months from the balance sheet date, Liabilities for Employees Remuneration and Benefits, Liabilities for Purchase/Construction of Fixed Assets and Deposits, Retention Money from Contractors and Others. Other Current Liabilities have increased by 124.84 crore to 709.96 crore (Previous year 585.12 crore).

Other Current Liabilities

Other Current Liabilities mainly include current liability of Advance against Depreciation and Advance from customers etc. Other Current Liabilities at the year-end was 77.53 crore (Previous year 46.38 crore). The increase is mainly due to increase in advance from customers.

Provisions

Short Term Provisions include Unfunded Employees Benefits payable within Twelve Months as per Actuarial Valuation, Interest on Arbitration Awards and Performance Related Pay etc. Provisions have increased by 283.89 crore in the F.Y. 2020- 21 to 497.50 crore (Previous year 213.61 crore ) mainly due to increase in provision for interest on arbitration awards received during the year in respect of Nathpa Jhakri Hydro Power Station (NJHPS).

C. CONTINGENT LIABILITIES (NOTE NO 2.50)

The following are the components of claims against the company not acknowledged as debt:

(Rs. in Crore)

Particulars As at 31.03.2021 As at 31.03.2020
Capital Works 536.38 615.16
Land Compensation 25.06 27.53
Disputed Income Tax Demand 12.46 -
Others 201.09 150.00
Total 774.99 792.69

Contingent Liabilities decreased by 17.70 crore to 774.99 crore as of March 31, 2021(Previous year 792.69 crore) mainly on account of decrease in contingent liabilities relating to capital works.

D. BUSINESS AND FINANCIAL REVIEW OF SUBSIDIARY & JOINTVENTURE COMPANIES

1. Subsidiary Companies

Company has two wholly owned subsidiary companies as at 31.03.2021. Presently both the companies are yet to commence the operations. The performance of the subsidiaries is as under:

SJVN Thermal Pvt. Ltd.

SJVN Thermal Pvt. Ltd is 100% subsidiary company of SJVN Ltd. The authorized share capital of SJVN Thermal Pvt. Ltd. is 3000 crore. The Company has taken up the development of 1320 MW Coal based Thermal

Power Project located near Chausa village in District Buxar of Bihar, which is in construction stage. Total paid up equity share capital as on 31st March, 2021 is 1896.68 crore (Previous year 946.68 crore) . Total Assets as on 31st March, 2021 is 2605.97 crore (Previous Year : 1097.28 crore).

SJVN Arun 3 Power Development Company Pvt. Ltd.

SJVN Arun 3 Power Development Company Pvt. Ltd. was incorporated in Nepal as a wholly owned subsidiary company of SJVN Ltd. on 25.04.2013. The authorized share capital of the company is INR1546.88 crore (NPR 2475.00 crore). Presently the company is executing the 900MW Arun-3 Hydroelectric Project in Nepal which is under construction. This project is to be installed in the Sankhuwasabha District of Nepal. Total paid up equity capital as on 31st March, 2021 is INR1360.67 crore (Previous Year INR 847.17 crore). Total Assets as on 31st March, 2021 is INR 1698.64 crore (Previous Year INR 1109.25 Crore).

2. Joint Venture Companies

As at 31.03.2021, the company has two joint ventures. The performance of the Joint Ventures is as under:

Kholongchhu Hydro Energy Limited

Kholongchhu Hydro Energy Limited (KHEL) was incorporated in Bhutan on June, 12, 2015 under the companies Act of the Kingdom of Bhutan 2000 as joint venture Company of Druk Green power Corporation Ltd, Bhutan (DGPC) and SJVN Ltd. having 50% shareholding each. The Company has been formed for construction of 600MW Kholongchhu Hydro Electric Project on the river Kholongchhu, Bhutan which is in construction stage. SJVN has invested an amount of 190.43 Crore as on 31.03.2021 (Previous Year 166.53 crore).

Cross Border Power Transmission Company Limited

Cross Border Power Transmission Company Limited (CPTC) is a joint venture of SJVN Ltd with IL&FS Energy Development Company Ltd. (IEDCL), Power Grid Corporation of India Ltd. (PGCIL) & Nepal Electricity Authority (NEA). The Company is principally engaged in establishment, operation & maintenance and transfer of Indian Portion of Indo-Nepal Cross Border Transmission Line from Muzaffarpur to Dhalkebar.

SJVN has invested 12.61 crore (Previous Year 12.61 crore) in the joint venture. The total income and PAT during the year 2020-21 are 33.43 crore (previous year 40.79 crore) and 14.74 Crore (previous year 21.47 crore) respectively.

E. CONSOLIDATED FINANCIAL STATEMENTS OF SJVN LTD.

The consolidated financial statements have been prepared in accordance with Indian Accounting Standard (Ind AS-110)- ‘Consolidated financial Statements, Ind AS-28 -Investments in Associates & Joint Ventures, Ind AS 112- ‘Disclosure of Interests in other entities and are included in the Annual Report.

The Financial Statements of the company and its subsidiaries are combined on line by line basis by adding together of the like items of assets, liabilities, income and expenses after eliminating intra-group balances, intra-group transactions, unrealized profit or losses. The Joint Venture Companies have been consolidated by using the Equity Method of Accounting.

A brief summary of the results on a consolidated basis is given below: (Rs. in Crore)

Particulars FY 2020-21 FY 2019-20
Total Revenue 3222.84 3103.51
Profit before Tax 2185.13 1971.50
Profit after Tax 1645.61 1566.76
Other Comprehensive Income (net of tax) (1.66) (14.20)
Total Comprehensive Income 1643.95 1552.56