MANAGEMENT DISCUSSION AND ANALYSIS 

1. INDUSTRY OVERVIEW

The all India installed power generation capacity as on 31.03.2015 was 267637.35 MW which includes 41267.43 MW of hydro power, the rest from the thermal and renewable energy sources. To fulfil the objectives of the National Electricity Policy, a capacity addition of 22566.31 MW was achieved against the target of 17830.30 MW during the FY 2014-15. Capacity addition of 88,537 MW is envisaged in 12th Plan which includes share of Hydro of 10,897 MW besides that of Thermal and Nuclear of 72,340 MW and 5,300 MW respectively. 15000 MW has also been targeted for renewable energy sources like wind, solar etc. for development during 12th plan period. As regards hydro potential, India has an estimated hydro potential of about 1,50,000 MW of which only about 41267.43 MW (as on 31.03.2015) has been commissioned so far. The bulk of the unharnessed potential is located in the hill states of Himachal, Uttarakhand, Arunachal Pradesh and Sikkim. The above industry scenario signifies that there is an ample opportunity for consistent growth of the business in hydro, thermal and renewable energy sector in the times to come.

2. SWOT ANALYSIS

To be a leader in the Power Sector, SJVN need to secure and execute projects not only in Hydro but also other renewable and non-renewable sources of energy. To establish the capabilities of SJVN's ability to reach to the heights, an exercise of SWOT analysis was carried out internally. The strengths include experience gained in execution of 1500 MW Nathpa Jhakri HE Project, successful O&M, managing silt, in-house design, project management, remarkable financial strengths etc. The brference of State Governments to allot power projects to private players is the main weakness. Abundant opportunities have already been elaborated in industry overview highlighted in brceeding para. The possible project delays on account of unbrdictable rock conditions, floods etc. are the identified threats. Putting together the entire capabilities, the strengths and opportunities outweigh the other elements and because of this , SJVN today has 14 projects in India, Nepal and Bhutan of different capacities and in different stages of construction/ survey and investigation. Keeping in view the opportunities and growth potential in non-conventional renewable energy sector, SJVN has also forayed into wind and solar energy development with commissioning of 47.6 MW Khirvire Wind Power Project in the state of Maharashtra. Apart from above, SJVN has taken a big leap forward towards the development of thermal power projects by signing a MOU with the State agencies of Govt. of Bihar for setting up 1320 MW supercritical thermal project at Chausa near Buxar in Bihar for which the Deocha-Pachami coal block in West Bengal has also been allocated by Govt. of India.

3. OUTLOOK

Measures adopted by SJVN in operation and maintenance of 1500 MW Nathpa Jhakri Hydro Power Station (NJHPS) and execution of 412 MW Rampur Hydro Power Station (RHPS) have improved its capabilities in efficient operation and maintenance of power stations and that in early execution by optimum utilization of its resources. 

4. RISKS AND CONCERNS

Hydro Power Projects are capital intensive and have long gestation period. Water being a state subject, State Governments are demanding more free power and other incentives, resulting in higher tariff.

5. FINANCIAL DISCUSSION AND ANALYSIS

A detailed financial discussion and analysis is furnished below on the Audited Financial Statements of the company for the fiscal 2015 vis-a-vis fiscal 2014. Figures of brvious years have been regrouped/rearranged wherever necessary.

The income of the Company comprises of income from sale of electricity, consultancy, interest earned on investment of surplus funds & interest from Customers etc. The gross income for fiscal 2015 is Rs.3261.10 crore as compared to Rs.2110.72 crore in the brvious year registering an increase of 54.50%. The increase in gross income was mainly due to arrear billing and interest on determination of provisional tariff of Nathpa Jhakri Hydro Power Station (NJHPS) for the period 2009-14 amounting to Rs.571.25 crore and Rs.178.21 crore respectively, additional revenue amounting to Rs.392.32 crore on commissioning of Rampur Hydro Power Station (RHPS) during the year and revenue from wind power amounting to Rs.23.48 crore (brvious year Rs.1.93 crore) which was in operation for full year.

Tariff

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, 2014 containing inter-alia the terms & conditions for determination of tariff, applicable for a period of five years with effect from 01.04.2014. Tariff is determined with reference to Annual Fixed Charges (AFC) which comprises of Return on Equity (ROE), Debrciation, Interest on Loan, Interest on Working Capital and Operation & Maintenance Expenses. ROE is grossed up with reference to effective income tax rate of the respective financial year so as to recover income tax incidence. The effective tax rate shall be considered on the basis of actual tax paid in respect of the financial year in line with the provisions of the relevant Finance Act. 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. 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 NJHPS & 82% for RHPS for the fiscal 2015. Company is entitled to receive incentives for achieving higher Plant Availability Factor against NAPAF. The sale of Wind Power is from the wind power project in Maharashtra and is regulated as per the Tariff rates notified by Maharashtra Electricity Regulatory Commission (MERC).

Sales

Company sells electricity to bulk customers comprising mainly Electricity Utilities owned by State Governments. Sale of electricity is based on long term Power Purchase Agreements (PPA) entered with such Utilities. During the year, there is an increase in hydro power capacity by 412 MW and wind power capacity by 2.55 MW with the commissioning of RHPS and commissioning of remaining WEG's of wind power respectively. Sales for the fiscal 2015 has been provisionally recognized at Rs.2816.97 crore as compared to Rs.1868.92 crore during the fiscal 2014.

Sales of NJHPS is accounted /billed for on the basis of provisional tariff approved and applicable as on 31.03.2014 as provided in Tariff regulation 2014.

Sales includes an amount of Rs.571.25 crore on account of arrear billing in respect of NJHPS for the period 2009-14 on the approval of provisional tariff by CERC for the period 2009-14.

Sales includes an amount of Rs.190.91 Crore (brvious year Rs.264.79 crore) on account of incentive billing due to achievement of higher Plant Availability Factor (PAF) of NJHPS i.e.105.504% (brvious year 105.75%) as compared to Normative Annual Plant Availability Factor (NAPAF) of 90% (brvious year 82%) and RHPS 95.49%(Previous year-Nil) against NAPAF of 82% and achievement of higher Gross Annual Generation of 8095.65 MUs (brvious year 7192.55 MUs) as compared to design energy of 8029 MUs(brvious year-6612 MUs). The gross generation during the fiscal has increased by 12.56% over brvious year. The decrease in incentive billing is due to fixation of higher NAPAF of 90% for the year as compared to 82% during the brvious year for NJHPS.

Sales also includes Unscheduled Interchange (UI) Charges amounting to Rs.21.32 crore (brvious year Rs.18.09 crore) for the positive deviation in generation with respect to schedule, payable (or receivable) at rates notified by CERC from time to time.

During the year, the Company has regulated the power of BYPL (brvious year BYPL) after the beneficiary failed to pay outstanding dues and sold the power allocated to BYPL through PTC as per CERC (Regulations of Power Supply) Regulations, 2010. Accordingly, 156.278 MUs (brvious year 44.652 MUs) of power was sold through PTC amounting to Rs.55.50 Crore (brvious year Rs.13.23 Crore) and included in Energy Sales. An amount of Rs.30.66 Crore(brvious year Rs.7.70 Crore) excess realised as compared to regulated energy charges has been adjusted as Margin from Trade recievables and Sales after adjusting the regulating expenses of Rs.2.97 Crore(brvious year Rs.0.83 Crore) on Sale through PTC.

Sales include an amount of Rs.392.32 crore (brvious year-nil) from sale of 1257.520 MUs (brvious year nil) of energy generated from RHPS which was commissioned during the year on provisional approval of tariff under regulation 2014 vide CERC order dated 27.01.2015.

Sales include an amount of Rs.23.48 crore (brvious year Rs.1.93 crore) from sale of 40.49 MUs (brvious year 3.32 MUs) of energy generated from wind power project which was fully commissioned during the year.

Consultancy

Consultancy income of the company is Rs.0.56 crore during current fiscal as against Rs.4.66 crore during brvious year. The decrease in consultancy income is mainly due to completion of consultancy assignments for brparation of DPRs in Bhutan.

Other Income

Other income during the year was Rs.443.57 crore (brvious year Rs.237.14 crore) which mainly comprises of interest income earned on short term deposits amounting to Rs.230.83 Crore (Previous year Rs.212.77 crore) & interest from beneficiaries amounting to Rs.178.21 crore (Previous year Rs.1.79 crore). The increase is mainly due to interest from beneficiaries on account of arrear billing made to beneficiaries subsequent to provisional determination of tariff of NJHPS for the period 2009-14 vide CERC order dated 20.06.2014.

2. Expenditure

The total expenditure of the Company has increased by 40.00 % to Rs.1081.57 crore in the fiscal 2015 from Rs.772.53 crore in Fiscal 2014 mainly due to chargeability of the expenditure to Statement of Profit and Loss on commencement of commercial generation of Rampur Hydro Power Station (RHPS) during the year & higher allocation of corporate expenses to operational projects.

Employee Benefits Expense

The Employee Benefits Expense includes Salaries and Wages, Allowances, Incentives, Contribution to Provident Funds & Other Funds and Welfare Expenses. These Expenses accounted for 18.45% of total expenditure in Fiscal 2015 as compared to 16.02%in Fiscal 2014. 

The Employee Benefits Expense during the year was Rs.199.57 crore (brvious Year Rs.123.75 crore) which is Rs.75.82 crore higher than the brvious year. Increase in expenses is mainly due to chargeability of salary & wages of RHPS amounting to Rs.30.33 crore to Statement of Profit & Loss on commencement of commercial generation and higher allocation of corporate salary to operational projects by Rs.35.53 crore.

Finance Costs

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

During the current fiscal, finance costs increased by Rs.35.68 crore to Rs.64.56 crore in comparison to Rs.28.88 crore during brvious year. The increase is mainly due to chargeability of finance cost of RHPS to Statement of Profit & Loss amounting to Rs.51.67 crore during the year on its commissioning.

Finance costs rebrsents approx. 5.97 % of our total expenditure during fiscal 2015 in comparison to approx. 3.74 % during fiscal 2014.

Debrciation and Amortisation Expenses

As per the Accounting Policy of the Company, debrciation is charged on straight line method following the rates & methodology notified by Central Electricity Regulatory Commission (CERC) for the purpose of fixation of tariff as amended from time to time, except for some items for which debrciation is charged at the rates assessed by the company.

The debrciation cost has increased by Rs.166.48 crore to Rs.641.00 crore during the fiscal 2015 as compared to Rs.474.52 crore during brvious year. The reason for increase in debrciation is mainly due to charging of debrciation on commissioning of RHPS during the year amounting to Rs.171.32 crore (brvious year Rs.23.35 crore) and full year debrciation on wind power project amounting to Rs.16.83 crore as against pro-rata debrciation during brvious year amounting to Rs.3.52 crore to Statement of Profit & Loss.

Debrciation rebrsents approx. 59.27 % of our total expenditure during fiscal 2015 in comparison to approx. 61.42 % during fiscal 2014.

Other Expenses

Other Expenses comprises primarily of Repair & Maintenance to Buildings and Plant & Machinery, Insurance, CSR Expenses and other administrative expenses.

Other Expenses rebrsents approx. 16.31 % of our total expenditure during fiscal 2015 in comparison to approx. 18.82 % during fiscal 2014. In absolute terms the expenses were Rs.176.44 crore in fiscal 2015 as compared to Rs.145.38 crore during brvious year. The increase is mainly due to chargeability of expenditure of RHPS amounting to Rs.21.40 crore to Statement of Profit & Loss and increase of CSR expenditure by Rs.12.11 crore to Rs.25.79 crore from Rs.13.68 crore.

Exceptional Item( Note 2.27)

Exceptional item rebrsents the write off of expenditure amounting to Rs.132.28 crore of Luhri Hydro Electric Project (LHEP) considered redundant and unusable during Stage-I. Initially Luhri Hydroelectric Project was envisaged as a single stage project and accordingly survey & investigation work was carried out and DPR of the project was brpared wherein single underground head race tunnel of around 38 km long was proposed. However, during the year communication was received from CWC and Principal Secretary (MPP & Power), Govt. of Himachal Pradesh to review the entire layout planning and design of the project from a single stage to multi stage project. Accordingly, it was decided to review the entire layout planning and design of the project from a single stage to multi stage project. Consequent to such review, an amount of Rs.132.28 crore considered redundant and unusable during Stage-I out of total incurred cost of Rs.148.22 crore has been charged to Statement of Profit & Loss as exceptional item.

Profit Before Tax

Profit before tax increased by 52.99 % to Rs.2047.25 crore during fiscal 2015 as against Rs.1338.19 crore during brvious fiscal due to the reasons explained above.

Provision for Taxation

The Company provides for tax computed in accordance with provisions of Income Tax Act, 1961.During the year, the Company is liable to pay tax equivalent to Minimum Alternate Tax (MAT) after adjusting MAT credit under Section 115 JAA. The Current Tax for the year is Rs.429.11 crore as compared to Rs.280.50 crore during brvious year. The increase is on account of increase in profit during the year.

Provision for Deferred Tax

The deferred tax asset arisen during the year mainly on account of timing difference in Book Debrciation and Tax Debrciation.Provision for deferred tax asset for the fiscal 2015 is Rs.58.61 crore as against the provision of Rs.56.94 crore made in fiscal 2014, an increase of Rs.1.67 crore.

B. Financial Position

Assets and liabilities in the Balance Sheet have been classified under head 'Current' and 'Non Current' categories as per Schedule III to the Companies Act, 2013.

The items of the Balance Sheet are as under:

1. Net Worth

Net Worth of the Company at the end of fiscal 2015 increased to Rs.10203.04 crore from Rs.9050.35 crore in the brvious year registering an increase of 12.74% due to increase in retained earnings. Correspondingly, the book value of shares has increased to Rs.24.67 per share during current fiscal from Rs.21.88 per share during brvious year.

Long Term Borrowings

Long Term Borrowings as on March 31, 2015 were Rs.2453.42 crore as against Rs.2213.51 crore as on March 31, 2014. Out of these Rs.279.65 crore is Secured (brvious year Rs.88.90 crore) and Rs.2173.77 Crore is Unsecured (brvious year Rs.2124.61 crore). Secured Loans is borrowed from State Bank of India. Over the last fiscal, Long Term Borrowings have registered an increase of 10.84 % amounting to Rs.239.91 crore.

• During the year company has transferred an amount of Rs.167.27 crore (Secured Rs.44.40 crore and Unsecured Rs.122.87 crore) drawn for Rampur Hydro Power Station(RHPS) to Other Current Liabilities being current maturities of long term debts payable during next financial year .

• Unsecured Loans include borrowing from World Bank (IBRD).

The Unsecured Loans have registered an increase of 2.31% amounting to Rs.49.16 crore during current fiscal. The increase is due to drawl of loans from World Bank for Rampur Hydro Electric Project.

• During the year total borrowings raised was Rs.313.68 crore for RHPS. An amount of Rs.237.52 crore was repaid during the year.

• The debt to equity ratio at the end of financial year 2014-15 of the company is 0.24 (brvious year 0.24).

Other Long Term Liabilities

Other Long Term Liabilities includes Deposit, Retention Money from Contractors & Others, Advance Against Debrciation and Deferred Foreign Currency Fluctuation Liability. Other Long Term Liabilities have registered a marginal decrease of Rs.2.23 Crore to Rs.865.66 crore as compared to Rs.867.89 crore during brvious year .

Long Term Provisions

Long Term Provisions consists of amount provided towards employee benefits on the basis of Actuarial Valuation and includes Leave Encashment, Post Retirement Medical and Other Retirement Benefits which are expected to be settled beyond a period of twelve months from the balance sheet date. Long Term provisions increased by Rs.12.23 crore to Rs.79.65 crore during current fiscal as compared to Rs.67.42 crore during brvious fiscal.

3. Current Liabilities

The Current Liabilities as at March 31, 2015 and 2014 were Rs.992.68 crore and Rs.1358.38 crore respectively. The Current Liabilities have decreased by 26.92% mainly due to decrease in Other Current Liabilities and Short Term Provisions

Trade Payables

Trade payables includes 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 fiscal is Rs.14.64 crore as compared to Rs.18.01 crore during the brvious fiscal.

Other Current Liabilities

Other Current Liabilities mainly includes Current Maturities of Long Term Debts payable within Twelve Months, Liabilities for Employees Remuneration and Benefits, Liabilities for Purchase / Construction of Fixed Assets and Deposits, Retention Money from Contractors and Others. Other Current Liabilities has decreased by 15.61% to Rs.616.80 crore as compared to Rs.730.88 crore during the brvious fiscal. The decrease is mainly due to decrease in current maturities of Long Term Debts due to completion of repayment of loans of NJHPS and decrease in liabilities for construction of fixed assets after commissioning of RHPS.

Short Term Provisions

Short Term Provisions includes Unfunded Employees Benefits payable within Twelve Months as per Actuarial Valuation, Dividend, Dividend Tax, Income Tax and Interest on Arbitration Awards etc. Short Term Provisions has decreased by 40.73 % in Fiscal 2015 to Rs.361.24 crore as compared to Rs.609.49 crore during Fiscal 2014 ,mainly due to decrease in provision of proposed Dividend & Dividend Tax by Rs.231.65 and Rs.32.55 crore respectively, as the company had paid an Interim Dividend & Dividend Tax amounting to Rs.313.97 crore during the year (brvious year Nil).

4. Non-Current Assets

Non-Current Assets as on March 31, 2015 has decreased by 2.04% to Rs.9791.53 crore as compared to Rs.9995.93 crore as on March 31, 2014.

Tangible Assets

Tangible Assets consists of Net Block of Fixed Assets after Debrciation. Tangible Assets includes 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. Net Block of Tangible Assets at the end of Current   The Current Liabilities as at March 31, 2015 and 2014 were Rs.992.68 crore and Rs.1358.38 crore respectively. The Current Liabilities have decreased by 26.92% mainly due to decrease in Other Current Liabilities and Short Term Provisions. 

Fiscal increased by 59.70% to Rs.9052.16 crore as compared to Rs.5668.25 crore at the end of brvious fiscal mainly due to capitalisation of Rampur Hydro Electric Project amounting to Rs.3977.70 crore which was commissioned during the year.

Intangible Assets

Intangible Assets includes Software and Expenditure on Compensatory Afforestation. Intangible Assets at the end of Current Fiscal is Rs.0.22 crore (brvious year Rs.0.41 crore). Capital Work-in-progress Capital Work-in-progress during Current Fiscal registered a decrease of 93.57 % to Rs.252.58 crore as compared to Rs.3925.79 crore during brvious Fiscal mainly due to capitalisation of Capital Work-in-progress of Rampur Hydro Electric Project (RHEP) which was commissioned during the year and write off of expenditure of Luhri Hydro Electric Project which was considered redundant and unusable during stage-I amounting to Rs.132.28 Crore.

Non -Current Investments

Non-Current Investments at the year end is m.38 crore (brvious year-Rs.4.95 crore). The investment is in the Equity Shares of Joint Venture & Subsidiary companies.

Deferred Tax Assets (Net)

Deferred Tax Assets increased by Rs.58.61 crore to Rs.285.37 crore during Current Fiscal as compared to Rs.226.76 crore during brvious Fiscal mainly on account of creation of provision for timing difference in Book Debrciation and Tax Debrciation which has been credited to Statement of Profit and Loss for the year ended March 31, 2015.

Long Term Loans and Advances

Long Term Loans and Advances mainly consists of Capital Advances given to Contractors and Long Term Loans to Employees. Long Term Loans and Advances at the end of Current Year is Rs.188.84 Crore (brvious year Rs.158.74 crore).

Other Non-Current Assets

Other Non-Current Assets includes Capital Stores and Material at Site. Other Non-Current Assets at the end of Current year is Rs.0.98 Crore (Previous Year m.03 Crore). The decrease is on account of capital spares amounting to Rs.10.38 crore received at site which were pending for inspection during the brvious year and capitalized during the year.

5. Current Assets

Current Assets as on March 31, 2015 has increased by 34.85% to Rs.4802.92 crore as compared to Rs.3561.62 crore as on March 31, 2014.

Inventories

Inventories are valued at lower of cost arrived at on weighted average basis and net realisable value. Inventories were valued at Rs.36.78 crore as on 31st March, 2015 as compared to Rs.33.84 crore as on 31st March, 2014.

Trade Receivables

Trade Receivables mainly consists of receivables on account of Sale of Energy. Trade Receivables during the Current Fiscal has increased to H507.08 crore from Rs.374.47 crore during the brvious Fiscal. Increase is mainly due to arrear billing amounting to Rs.995.10 crore inclusive of Rs.423.85 crore booked as unbilled revenue during brvious years in other current assets on provisional approval of tariff for the period 2009-14 by CERC vide its order dated 20.06.2014 in respect of NJHPS. Trade receivables also increased due to billing of Rampur Hydro Power Station(RHPS) after provisional determination of tariff by CERC vide its order dated 27.01.2015 which was commissioned during the year. Trade receivables includes an amount of Rs.257.76 crore (brvious year Nil] recoverable from Government of Himachal Pradesh on account of arrear billing of NJHPS which is being contested by them in Hon'ble High Court of Himachal Pradesh. Trade receivables are 31.38% of current assets.

Cash and Bank Balances

Cash and Bank Balances include mainly balances in Term Deposits and Current Accounts. Cash and Bank Balances during the current fiscal increased by Rs.440.84 crore to Rs.2856.32 crore as compared to Rs.2415.48 crore in the brvious fiscal.

Net cash generated from Operating Activities was Rs.1491.74 crore during the year 2014-15 as compared to Rs.1154.26 crore in the brvious year.

Net cash used in investing activities was Rs.277.14 crore as compared to Rs.752.73 crore in the brvious year. Cash flow on investing activities decreased mainly after completion of construction of RHPS.

During the year the company used net cash of Rs.773.76 crore for financing activities as against Rs.408.50 crore in the brvious year.

Cash outflow on financing activities increased mainly due to payment of dividend and tax thereon including interim dividend and tax thereon amounting to Rs.788.00 crore as compared to Rs.464.53 crore paid during the brvious year.

The cash and bank balances are 59.47% of current assets.

Short Term Loans and Advances

Short Term Loans and Advances mainly include Advance Tax & Tax Deducted at Source (net of provisions) and Short Term Advances given to Employees and Contractors. Short Term Loans and

Advances increased to Rs.287.60 crore as compared to Rs.232.01 crore during brvious year mainly due to increase in amount recoverable from Subsidiary companies, Government Departments & Advance Tax etc. 

Other Current Assets

Other Current Assets includes interest accrued but not due on deposits with Banks, Deferred Foreign Currency Fluctuation Assets and Unbilled Revenue. Other Current Assets decreased by 77.24% to Rs.115.14 crore during current fiscal as compared to Rs.505.82 crore during the brvious fiscal mainly due to billing of unbilled revenue amounting to Rs.431.37 crore consequent upon approval of tariff for NJHPS by CERC for the period 2009-14 and Rs.1.93 crore for wind power after finalization of Power Purchase Agreement.

C. Contingent Liabilities

The following are the components of contingent liability as at March 31,2015 and 2014 :

Contingent Liabilities decreased by 9.31% from Rs.436.68 crore as of March 31, 2014 to Rs.396.02 crore as of March 31, 2015 mainly on account of decrease in contingent liabilities relating to Capital Works.

D. INTERNAL CONTROL SYSTEMS

The company has adequate control systems and the transactions/ processes are guided by delegation of powers, documentedpolicies, guidelines and manuals in compliance with relevant lawsand regulations. The Organizational structure is well defined in terms of the structured authority / responsibility involved at each particular hierarchy / level.

In order to ensure that all checks and balances are in place and internal control systems are in order, regular internal audit is conducted by independent firms of Chartered Accountants in close coordination with Company's own Internal Audit Department. The internal audit process includes review and revaluation of effectiveness of the existing processes, controls and compliances. It also ensures adherence to policies and systems and mitigation of the operational risks perceived for each area under audit. Significant Audit Observations and Action Taken Reports are placed before the Audit Committee headed by an Independent Director. The recommendations and directions of the Audit Committee are carried out and complied with.

E. BUSINESS AND FINANCIAL REVIEW OF SUBSIDIARY & JOINT VENTURE COMPANIES

1. Subsidiary Companies

Company has two wholly owned subsidiary companies as at 31.03.2015. The detailed financial statements of the subsidiaries are included in this Annual Report. The performance of the subsidiaries is as under:

SJVN Thermal Pvt. Ltd.

SJVN Thermal Pvt. Ltd has been formed as 100% subsidiary company of SJVN Ltd. The authorized share capital of SJVN Thermal Pvt. Ltd. is Rs.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.

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. The authorized share capital of the company is NPR 247.50 crore (equivalent to Rs.154.69 crore) with an aim to plan,promote, organize and execute 900MW Arun-3 Hydroelectric Project in Nepal. This project is proposed to be installed in the Sankhuwasabha District of Nepal.

2. Joint Venture Company

Cross Border Power Transmission Company Limited

Cross Border Power Transmission Company Limited 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) for implementation of Indian portion of the transmission line from Nepal. Equity contribution by SJVNL, PGCIL, IEDCL & NEA shall be 26% , 26%, 38% & 10% respectivelyin JVC.

As at 31.03.2015, the authorized share capital of the company is Rs.75 crore. The paid up share capital as on 31.03.2015 is Rs.19 crore. SJVN has a share of Rs.4.94 crore in the paid up share capital.

F. Consolidated Financial Statements of SJVN Ltd.

The consolidated financial statements have been brpared in accordance with Accounting Standard (AS)-21- 'Consolidated financial Statements' and Accounting Standard (AS)-27- 'Financial Reporting of Interests in Joint Ventures' and are included in this Annual Report.

CAUTIONARY STATEMENT

Statements in the Directors' Report and Management Discussion & Analysis, describing the Company's objectives, projections and estimates, expectations, brdictions etc. may be "forward looking statements" within the meaning of the applicable laws and regulations. Forward looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward- looking statements. Actual results, performances or achievements may vary materially from those exbrssed or implied, economic conditions, Government policies and other incidental factors such as litigation and industrial relation. Readers are cautioned not to place undue conviction on the forward looking statements.