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Company Information

Home » Market » Company Information

Tata Power Company Ltd.

Nov 14, 03:52
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Nov 14, 03:59
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VOLUME : 6076033
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Market Cap. ( ₹ ) 14781.59 Cr. P/BV 0.88 Book Value ( ₹ ) 61.82
52 Week High/Low ( ₹ ) 84/50 FV/ML 1/1 P/E(X) 6.75
Bookclosure 18/06/2019 TTM EPS ( ₹ ) 2.24 Div Yield (%) 2.38
DIRECTOR'S REPORT
You can view full text of the latest Director's Report for the company.
Year End :2019-03 

To the Members,

The Directors are pleased to present to you the Hundredth Annual Report on the business and operations of your Company along with the audited Financial Statements of Account for the year ended 31st March 2019.

1. FINANCIAL RESULTS

(Table 1) Figures in Rs. crore

Standalone

Consolidated

FY19

FY18

FY19

FY18#

(a)

Net Sales/Income from Operations*

7,688

7,301

29,493

26,430

(b)

(Less): Operating Expenditure

(5,302)

(4,924)

(22,995)

(20,453)

(c)

Operating Profit

2,386

2,377

6,498

5,977

(d)

(Less)/: Forex Loss/(Gain)

(11)

(20)

(141)

(114)

(e)

Add: Other Income

516

929

396

433

(f)

(Less): Finance Cost

(1,500)

(1,431)

(4,170)

(3,761)

(g)

Profit before Depreciation and Tax

1,391

1,855

2,583

2,535

(h)

(Less): Depreciation/Amortisation/Impairment

(632)

(663)

(2,393)

(2,346)

(i)

Profit Before Share of Profit of Associates and Joint Ventures

759

1,192

190

189

(j)

Add: Share of Profit of Associates and Joint Ventures

-

-

1,287

1,554

(k)

Profit Before Exceptional Item

759

1,192

1,477

1,743

(l)

(Less)/Add: Exceptional Item

1,168

(4,437)

1,746

1,102

(m)

Profit/ (Loss) before Tax

1,927

(3,245)

3,223

2,845

(n)

(Less)/Add: Tax Expenses or Credit

(92)

166

(656)

(162)

(o)

Net Profit/(Loss) after Tax from Continuing Operations

1,835

(3,079)

2,567

2,683

(p)

Profit/ (Loss) before Tax from Discontinued Operations

(192)

(86)

(192)

(86)

(q)

(Less)/Add: Tax Expenses or Credit from Discontinued Operations

66

14

66

14

(r)

Net Profit/(Loss) after Tax from Discontinued Operations

(126)

(72)

(126)

(72)

(s)

Net Profit for the year

1,709

(3,151)

2,441

2,611

(t)

Net Profit for the year Attributable to -

- Owners of the Company

1,709

(3,151)

2,191

2,408

- Non-controlling interests

-

-

250

203

(u)

Other Comprehensive income (Net of Tax)

(45)

45

165

94

(v)

Total Comprehensive Income Attributable to -

1,664

(3,106)

2,606

2,705

- Owners of the Company

1,664

(3,106)

2,356

2,502

- Non-controlling interests

-

-

250

203

*Including rate regulatory income/(expense)

#Restated - Refer notes to consolidated financial statements

2. FINANCIAL PERFORMANCE AND THE STATE OF THE COMPANY’S AFFAIRS

2.1. CONSOLIDATED

On a Consolidated basis, the Operating Revenue was at Rs. 29,493 crore in FY19, compared to Rs. 26,430 crore in FY18. The increase was mainly due to recovery of higher fuel and power purchase cost related to regulated businesses, capacity addition in renewable business and good operational performance by the businesses. The operating profit for the year under review recorded an 8.72% growth over FY18. Finance costs increased from Rs. 3,761 crore to Rs. 4,170 crore largely due to forex, other credits in FY18 and other one-off items. The profits from Joint Ventures (JV) and Associates were lower mainly due to lower FOB price of coal on account of new regulations in Indonesia impacting the coal mines.

The Consolidated Profit after Tax in FY19 was at Rs. 2,441 crore compared to Rs. 2,611 crore in FY18 mainly due to lower profits from coal companies on account of lower FOB price. The current year exceptional items include gain on sale of investments in associate companies viz. Tata Communications Limited (TCL) and Panatone Finvest Limited (PFL) partially offset by impairment provisions of Rithala plant. The previous year’s exceptional items include reversal of impairment provision of investment in coal mining made in earlier years.

[Refer Section 10 - Management Discussion and Analysis (MD&A) of this report for details]

2.2. STANDALONE

On a Standalone basis, the Operating Revenue stood at Rs. 7,688 crore in FY19 compared to Rs. 7,301 crore in FY18. The increase was mainly due to higher fuel cost and power purchase cost being passed through for the regulated business and positive effect of Multi-Year Tariff (MYT) order for the Mumbai license area.

The profit in FY19 was at Rs. 1,709 crore as compared to a loss of Rs. 3,151 crore last year. This was mainly due to provision of Rs. 4,330 crore for impairment of investments in Mundra, Georgia and Trombay generating station in FY18.

The Earnings per Share (Basic and Diluted) in FY19 stood at Rs. 2.63 before exceptional items and at Rs. 5.90 after exceptional items.

(Refer Section 9 - MD&A of this report for details)

2.3. EXCEPTIONAL ITEMS

CGPL-Coal Mines SBU: Considering the fact that the investment in Indonesian coal mines were made to secure coal supply to CGPL and an adverse impact on CGPL is offset to some extent by the investment in the coal mines, the said investments have been treated as a single Cash Generating Unit (CGU). This has a significant impact on how the impairment of the combined CGU is assessed every year as per Ind AS 36.

The combined effect of these two had resulted in an impairment of Rs. 3,555 crore of the investment in CGPL in the standalone accounts and reversal of impairment of Rs. 1,887 crore (part amount of earlier impairment provided) of investment in coal mining companies in consolidated accounts of FY18.

Entry Tax: The Company had received demands in respect of entry tax on import of fuel for Trombay plant. During the year under review, Government of Maharashtra has notified an amnesty scheme for settlement of arrears of tax, interest and penalty. The Company has decided to avail of the scheme and, accordingly, recognized a provision of Rs. 345 crore towards settlement as per the above scheme. The amount has been recognised as revenue to the extent recoverable from consumers.

Sale of Investments in Associate Companies: During the year under review, the Company sold investments in TCL and PFL which were classified as assets held for sale in FY18. The resultant gain on sale of investments of Rs. 1,213 crore and Rs. 1,897 crore has been included as an exceptional income in the standalone and consolidated financial statements respectively.

Others (only in the consolidated accounts): Impairment of Rs. 106 crore for the carrying amount of Rithala power plant has been made in Tata Power Delhi Distribution Limited (TPDDL) due to no likelihood of its operation with gas not being available at administered prices and the partial disallowance of tariff by Delhi Electricity Regulatory Commission (DERC).

No material changes and commitments have occurred after the close of the year under review till the date of this Report which affect the financial position of the Company.

2.4. ANNUAL PERFORMANCE

Details of the Company’s annual financial performance as published on the Company’s website and presented during the Analyst Meet, after declaration of annual results can be accessed on the Company’s website at https://www.tatapower. com/investor-relations/inv-info-archive.aspx (alternatively, scan the adjacent QR code using a mobile device to read the file on the Company website).

3. DIVIDEND

Based on the Company’s performance, the Directors of your Company recommend a dividend of 130% (Rs. 1.30 per share of Rs. 1 each), subject to the approval of the Members.

According to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the top 500 listed entities based on market capitalization, calculated as on 31st March of every financial year, are required to formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites. Accordingly, the Dividend Policy of the Company is provided in Annexure-I.

The Dividend Policy of the Company can also be accessed on the Company’s website at https://www.tatapower.com/corporate/policies.aspx (alternatively, scan the adjacent QR code using a mobile device to read the policy on the Company website).

4. CURRENT BUSINESS

Your Company is present across the value chain of power business viz. Generation, Transmission, Distribution, Power Trading, Power Services, Coal Mines and Logistics, Solar Photovoltaic (PV) manufacturing and associated Engineering, Procurement & Construction (EPC) services.

The Company has re-organised itself into 4 business verticals in order to bring focus and accountability. These segments will eventually be converted to Strategic Business Units (SBUs) with individual Profit and Loss (P&L) and Balance Sheet targets of their own and this change shall be reflected in the consolidated financial statement from next year onwards.

Currently, the Company (including its subsidiaries) has nearly 33% of its capacity (in MW terms) in clean and green generation sources (hydro, wind, solar and waste heat recovery).

As on 31st March 2019, the Tata Power group of companies had an operational generation capacity of 10,957 MW from various fuel sources - thermal (coal, gas and oil), hydroelectric, renewable energy (wind and solar PV) and waste heat recovery, details of which are given below in Table 2.

Details of generation businesses in operation (Table 2)

Fuel Source

State

Location

Normative Capacity under management (MW)

PPA Tenure

Return Profile

Category Total (MW)

Thermal -Coal/Oil/Gas

Gujarat

Mundra

4,150

Long term PPA

Bid-based

7,340

Maharashtra

Trombay

1,430*

Medium term PPA

Regulated

Jharkhand

Maithon

1,050

Long term PPA

Regulated

Jharkhand

Jojobera

548

Long term PPA

a) Regulated returns

b) Bilaterally negotiated (captive)

Indonesia

PT Citra Kusuma Perdana

54

Long term PPA

Bilaterally negotiated (captive)

New Delhi

Rithala (Gas based)

108

None

PPA is being pursued

Thermal -Waste Heat Recovery

Jharkhand

Jamshedpur

120

Long term PPA

Bilaterally negotiated (captive)

375

Odisha

Kalinganagar

135

Long term PPA

Bilaterally negotiated (captive)

West Bengal

Haldia

120

Short term PPA

Merchant sale and bilateral contracts

Hydro

Maharashtra

Bhira

300

Medium term PPA

Regulated

693

Maharashtra

Khopoli

72

Maharashtra

Bhivpuri

75

Bhutan

Dagachhu

126

Short term PPA

Merchant sale

Zambia

Itezhi Tezhi

120

Long term PPA

Regulated

Renewables

Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Tamil Nadu, Rajasthan, Andhra Pradesh and South Africa

Wind farms

1,161

Long Term PPA

Feed-in tariff and bid-driven contracts

2,549

Andhra

Pradesh, Bihar,

Delhi, Gujarat,

Haryana,

Jharkhand,

Karnataka,

Madhya

Pradesh, Punjab, Rajasthan, Tamil Nadu, Telangana and Uttar Pradesh

Solar

Photovoltaic (PV)

1,388

Long Term PPA

Feed-in tariff and bid-driven contracts

2,549

Total

10,957

*500 MW capacity (Unit#6) is classified as assets held for sale

Details of other businesses (Table 3)

Business

Entity

Returns/ Earnings Model

Key details

Transmission

Tata Power (TPC - T), Mumbai

25-year license w.e.f. August 2015 - regulated Return on Equity

Approx. 1,188 Ckms. of transmission lines, connecting generating stations to 22 receiving stations.

Powerlinks Transmission Limited (PTL)

Regulated Return on Equity

Approx. 2,328 Ckms. of 220 kV and 400 kV transmission lines to evacuate power from Eastern/North Eastern region to Northern Region.

Distribution

Tata Power (TPC - D), Mumbai

25-year license w.e.f. August 2015 - Regulated Return on Equity

Approx. 4,500 Ckms. of distribution network. Approx. 7 lakh consumers.

TPDDL

Regulated Return on Equity

Approx. 15,081 Ckms. of distribution lines. Over 16.96 lakh consumers.

Tata Power Ajmer Distribution Limited (TPADL)

Distribution Franchisee model

Approx. 2,130 Ckms. of network length. Approx. 1.40 lakh consumers.

Coal Investments

Coal and Infrastructure, Indonesia

Returns based on dynamics in International thermal coal market

Stake in Indonesian mines.

Solar PV

manufacturing, EPC

Tata Power Solar Systems Limited (TPSSL)

Returns based on sector dynamics and market competition

Manufacturing and sale of solar PV cells and modules and EPC services.

Power Trading

Tata Power Trading Company Limited (TPTCL)

Returns based on market dynamics in short term and bilateral power market subject to cap prescribed by CERC

Category I power trading license, which permits the company to trade any quantum of power.

Shipping

Trust Energy Resources Pte. Limited, Singapore (TERPL)

Returns based on long term charters

Vessels operated are of cape size.

Power Services

Tata Power

Returns based on sector dynamics and market competition

One of the leading service providers of project management, O&M and specialized services in the power sector.

Percentage contribution of different business models in the Generation segment (excludes those under construction)

(Table 4)

Model

Returns

Tata Power’s Projects

Capacity (MW)

% of overall capacity

Fixed return on equity

1) Regulated Return on Equity

2) Bilateral captive agreement

1) Mumbai Operations (Trombay & Hydro), Maithon, Jojobera Unit #2 and #3, TPDDL

2) IEL (Unit 5, PH6, KPO), Jojobera Unit#1 and #4, CKP (Indonesia)

3,892

35.5

Fixed Tariff (Renewables)

Feed-in-tariff Bid Driven

Wind and Solar projects

2,549

23.3

Fixed Tariff (Thermal/ Hydro)

Bilateral agreement Bid Driven

CGPL, ITPC (Zambia)

4,270

39.0

Merchant

Market driven

Haldia (120 MW) Dagachhu (126 MW)

246

2.2

Total

10,957

100

As part of its focus to prepare for the next phase of growth, the Company has embarked upon a plan to Simplify, Synergize and Scale-up (3S) its operations. The following key steps were taken during the year under review:

a) Sale of TCL and PFL;

b) Sale of Strategic Engineering Division (SED);

c) Purchase of 100% shares in Energy Eastern Pte Limited (EEPL), a wholly owned subsidiary of CGPL by TERPL, a wholly owned subsidiary of the Company;

d) Exploring opportunities to review and monetize overseas investments;

e) Changes in organisational structure.

Sale of Strategic Engineering Division

Your Company decided to sell SED to Tata Advanced Systems Limited, a wholly owned subsidiary of Tata Sons Private Limited at an enterprise value of Rs. 2,230 crore. SED is engaged in the business of indigenous design, development, production, integration, supply and life cycle support of mission critical defence systems. The Company had identified this business as a non-core activity and was looking for an appropriate buyer to exploit its full potential. This sale has been approved by the Company’s shareholders and is pending approval of National Company Law tribunal (NCLT) and Ministry of Defence. The transaction is proposed to be executed on a slump sale basis. The business value is mainly derived from future projections and orders; hence, the sale consideration has been split into upfront payment and milestone-based earn outs. The upfront payment has been agreed at an enterprise value of Rs. 1,040 crore. The upfront value will be adjusted for working capital changes and any profits or losses accrued till the time of closing. The balance earnout payment of Rs. 1,190 crore is subject to receipt of identified orders spread over the next 6 years.

Thermal Investment Platform - Acquisition of Prayagraj Power Generation Company Limited

Resurgent Power Ventures Pte Limited is a joint venture based out of Singapore between the Company, ICICI Bank Limited and international investors such as Kuwait Investment Authority and State General Reserve Fund of Oman. The Company owns a 26 per cent stake and the balance is held by the other investors.

In September 2018, Renascent Power Ventures Private Limited, a wholly owned subsidiary of Resurgent Power Ventures Pte Limited, Singapore signed a SPA with a consortium of lenders led by State Bank of India to acquire 75.01% stake in Prayagraj Power Generation Company Limited (PPGCL), which owns and operates a 1,980 MW supercritical power plant in the state of Uttar Pradesh.

The project has a 25-year PPA for 90% of generated power with UP Discoms with fuel cost as pass-through and Fuel Supply Agreement (FSA) with Northern Coalfields Limited (NCL) for 90% of its fuel requirement. The matter is pending adjudication by the regulator in light of certain conditions imposed prior to transfer of the ownership of the target company.

5. SUBSIDIARIES/JOINT VENTURES/ASSOCIATES

As on 31st March 2019, the Company had 50 subsidiaries (40 are wholly-owned subsidiaries), 38 Joint Ventures (JVs) and 6 Associates. Of the erstwhile subsidiaries, 3 companies have been classified as JVs under Indian Accounting Standards (Ind AS) and one of the investments has been classified as Associate.

During the year under review, the following changes occurred in your Company’s holding structure:

- The entire shareholding in erstwhile associates i.e. TCL and PFL was sold during the year. Renascent Power Ventures Private Limited was incorporated in India as a 100% subsidiary to an existing associate i.e. Resurgent Power Ventures Pte Limited.

A report on the performance and financial position of each of the subsidiaries, JVs and Associates has been provided in Form AOC-1.

The policy for determining material subsidiaries of the Company has been provided on the Company’s website at https://www.tatapower. com/corpo rate/policies.aspx (alternatively, scan the adjacent QR code using a mobile device to read the policy on the Company website).

6. RESERVES

As per Standalone financials, the net movement in the reserves of the Company for FY19 and FY18 is as follows:

Figures in Rs. crore (Table 5)

Particulars - Standalone

As of 31st March 2019

As of 31st March 2018

Capital Redemption Reserve

1.85

1.85

Capital Reserve

61.66

61.66

Securities Premium

5,634.98

5,634.98

Debenture Redemption Reserve

421.95

1,000.61

General Reserve

3,853.98

3,853.98

Retained Earnings

2,954.12

1,878.99

Equity Instrument through OCI

330.48

(374.12)

Statutory Reserve

660.08

660.08

The Board of Directors has decided to retain the entire amount of profits for FY19 in P&L account.

7. FOREIGN EXCHANGE - EARNINGS AND OUTGO

8. REGULATORY AND LEGAL MATTERS

The businesses of the Company are governed primarily by the Electricity Act, 2003 (EA, 2003) and associated regulations. Mentioned below are the critical regulatory orders pertaining to the Company that were issued during FY19, none of which impact the ‘going concern’ status of your Company.

8.1. COASTAL GUJARAT POWER LIMITED

8.1.1. RECOMMENDATIONS OF THE HIGH-POWERED COMMITTEE (HPC) APPOINTED BY THE GOVERNMENT OF GUJARAT

In order to resolve the viability issues of imported coal-based plants in the state of Gujarat, a HPC was set up by the Government of Gujarat in July 2018 and after several rounds of deliberations with various stakeholders like generators, distribution companies, consumer groups, lenders and others, it submitted its report in October 2018. Thereafter, the Government of Gujarat filed a petition with the Supreme Court of India (SC) for seeking clarification on whether the said report can be implemented and if the existing PPA can be amended. The SC clarified that the PPA can be amended if all the parties to the PPA agree to do so and its own judgement of April 2017 passed in this case shall not prevent such an amendment. It also asked CERC to consider the matter at the earliest. Accordingly, the Company has proceeded to amend the PPA with the five states to whom it is supplying power. The Company is in discussion with all the procurers to obtain their consent to the proposed amendments.

8.1.2. CHANGE IN LAW

The Ministry of Environment, Forest and Climate Change, Government of India (MoEF&CC), vide its notification, has revised the environment emissions norms mandating all thermal power plants to comply with the same by 2022.

CGPL’s PPA provides for considering this as a “Change in Law” event as this law was passed after the bidding date (December 2006). Your Company filed a petition with the CERC for declaring this notification as Change in Law to which the CERC has agreed. This order enables CGPL to recover through tariff, the capital cost and additional operational expenditure required to be incurred to meet the revised norms.

8.2. INDONESIAN COAL MINES

The Indonesian government, in early 2018, introduced a Domestic Market Obligation (DMO) scheme which requires a local coal mining company to sell 25 percent of its production to the domestic market at a fixed price of USD 70/MT or the market rate, whichever is lower, to protect state owned power plants against rising coal prices. This impacted the sale realisation of the mines, thereby impacting their profitability. The validity of the policy is till December 2019 and the Indonesian Government will review the same thereafter.

8.3. MUMBAI OPERATIONS

8.3.1. MULTI YEAR TARIFF ORDERS OF MERC

Maharashtra Electricity Regulatory Commission (MERC) passed its Mid-Term Review (MTR) Orders for Tariff Determination for FY19-20 for Mumbai Generation, Transmission and Distribution Business in the month of September 2018. Review petitions, as relevant, against some of the disallowances in the orders have been filed before the appropriate forum and orders for the same have been issued. Appeals have been filed for various issues against all three orders for Generation, Transmission and Distribution and hearings are yet to commence for the same.

8.3.2. ENTRY TAX

Your Company had filed a writ petition before the Bombay High Court (HC) challenging the constitutional validity of the Maharashtra Entry Tax Act and its applicability on some of our imported raw materials. HC dismissed the writ petition. Aggrieved, your Company filed Special Leave Petitions (SLP) with the SC and obtained a stay order. Thereafter, during the pendency of the SLP, the Government of Maharashtra amended the limitation period under the Entry Tax Act with retrospective effect. Aggrieved by this, your Company filed a Writ Petition in SC on the said issue. SC tagged the same along with our earlier SLP. The matter is now awaited for listing for final hearing and disposal.

The Government of Maharashtra in the meanwhile, has issued an Amnesty Scheme for settlement of arrears of tax, interest and penalty levied, payable or imposed under various acts including Entry Tax. The Company has decided to avail of the scheme and, accordingly, recognized a provision of Rs. 345 crore towards settlement as per the above scheme.

8.3.3. EXTENSION OF PPA BETWEEN TPC - G and BEST

MERC, vide its order dated 27th February 2018, approved extension of the validity of the PPA between Tata Power-Generation (TPC-G) and BEST for 677 MW (excluding Unit#6) till 31st March 2019.

Following a re-tendering process, BEST signed an agreement on 28th March 2019 to extend the PPA with TPC-G for a period of five more years till 31st March 2024.

8.3.4. EXTENSION OF PPA BETWEEN TPC - G AND TPC - D

MERC, vide its order dated 26th March 2019, approved extension of the validity of the PPA between TPC-G and Tata Power-Distribution (TPC-D) for 700 MW (excluding Unit#6) for a period of five more years till 31st March 2024. Both parties signed the PPA on 28th March 2019.

8.3.5. DEEMED CLOSURE OF 400 KV VIKROLI RECEIVING STATION AND ALLIED TRANSMISSION SCHEMES

MERC, vide its order on Tata Power - Transmission’s (TPC-T) Mid Term Review (MTR) Petition, ordered deemed closure of ‘400 kV Receiving station at Vikhroli’ transmission scheme.

TPC-T had filed a review petition seeking withdrawal of this deemed closure order. MERC, in January 2019, dismissed this petition and directed the State Transmission Utility (STU) to submit its recommendations regarding execution of the scheme under tariff-based bidding guidelines. TPC-T has filed an appeal before the Appellate Tribunal (APTEL) challenging the MERC order and sought expeditious disposal of the appeal. The hearings in the matter are in progress.

8.4. MAITHON POWER LIMITED (MPL)

PETITION SEEKING REVERSAL OF LIQUIDATED DAMAGES

CERC provisionally deducted Rs. 160 crore from the capital cost for expected Liquidated Damages (LD). MPL has filed a petition giving details of actual LD recovery and requested the CERC to pass the supplementary order for reversal of this deduction.

8.5. POWERLINKS TRANSMISSION LIMITED (PTL)

TRUING-UP FOR FY10-14 AND MULTI YEAR TARIFF FOR FY14-19

CERC had notified a draft amendment to CERC Tariff Regulations, 2014 abolishing the continuation of transmission majoration factor for PTL. PTL had objected to such an amendment. CERC, vide its amendment notified on 30th January 2019, confirmed admissibility of transmission majoration factor to PTL for a period of 25 years from the date of issue of the transmission license.

8.6. ENVIRONMENTAL NORMS

MoEF&CC, vide its notification has revised the environment emissions norms mandating all thermal power plants to comply with the same. Your Company is in the process of filing a petition with CERC seeking approval for the capital expenditure and tariff revision in lieu of the same for existing thermal units wherever applicable.

9. RISKS AND CONCERNS

Your Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in section 4 of MD&A in this Annual Report.

10. RISK MANAGEMENT FRAMEWORK AND INTERNAL FINANCIAL CONTROLS

Risk Management Framework:

The Company has adopted the Risk Management Policy which can be accessed on the Company’s website at https:// www.tatapower.com/corporate/ policies.aspx (alternatively, scan the adjacent QR Code using a mobile device to read the policy on the Company website). As per the said policy, a standardized Risk Management Process and System has been implemented across Tata Power group. Risk plans have been framed for all identified risks and uploaded in the system with mitigation action, target dates and responsibility. The Risk Register contains the mitigation plans. Functional Risk Management Committees closely monitor and review the risk plans.

As per the Listing Regulations, a Risk Management Committee (RMC) was constituted which currently comprises three Independent Directors and one NonExecutive Director. The RMC meets regularly to review critical strategic risks.

The Company was the first power company in India to get ISO 31000:2009 Statement of Compliance in FY15. In August 2018, the British Standards Institution (BSI) did an assessment of the Company and its eight major subsidiaries and conferred the ‘Statement of Compliance’ for Tata Power Group for ISO 31000:2009. The Company also bagged two awards for its Risk Management System.

The Company has obtained two copyrights for Risk Management - one for its Risk Quantification process and another for its web-based Risk Management System.

Internal Financial Controls and Systems:

The Company has its internal audit function which reviews and ensures sustained effectiveness of Internal Financial Controls (IFC) by adopting a systematic approach to its work.

To fulfil the requirements of the Companies Act, 2013 (Act), the in-house internal audit team integrated IFC controls into risk control matrix (RCM) of enterprise processes in FY18. 100% testing of IFC controls was ensured during process audit or creating separate audit areas of IFC testing where process audits were not due.

On review of the internal audit observations and action taken on audit observations, there are no adverse observations having material impact on financials, commercial implications or material non-compliances which have not been acted upon.

The Company continued the Control Self-Assessment (CSA) process, which included seven Tata Power group companies this year, whereby responses of all process owners were used to assess internal controls in each process. This helps the Company to identify focus audit areas, design the audit plan and support CEO/CFO certifications for internal controls.

11 . SAFETY

Safety is a core value for the Company and is given topmost priority. The Company has developed and implemented standards and procedures, in order to achieve world-class safety practices. This has helped in establishing a safety culture and inculcating safe behaviour among the employees and business associates. This ensures zero harm to everyone associated with the Company’s operations directly or indirectly.

The Company is committed to provide a safe and healthy working environment for its employees and associates. A Company-level occupational health and safety policy exists in line with Tata group’s occupational health and safety policy. This ensures increased vigilance and awareness on health and safety. Safety organisation has been established for developing and implementing Safety Management Systems and to facilitate a change in culture through leadership interventions to mitigate risks.

Safety Statistics FY19: (Table 7)

Sl. No

Safety Parameters in your Company’s work jurisdiction (Tata Power, CGPL, MPL, IEL, CTTL, PTL, TPDDL and TPSSL)

FY19

1

Fatality (Number)

2

2

LTIFR (Lost Time Injuries Frequency Rate per million-man hours)

0.26

3

Total Injury Frequency Rate (No of injuries per million-man hours)

1.72

4

Reporting of Safety Observation (higher the better)

1,40,828

Your Company is deeply aggrieved by the fatalities and accidents. It treats any fatality in any of its premises, of any of its employees, contractor/associate employees or any third party, with equal gravitas and is committed to taking the entire working environment and behaviour to the highest safety standards.

Your Company has increased its efforts on safety by adopting the following safety interventions in FY19 to improve safety in the organisation:

- Launched a campaign on Life Changing Injuries and Fatality Elimination Program (LIFE) across the Company.

- Received ISO 45001:2018 certification due to improvements in the safety management system.

- Used analytics for safety indices to enhance safety performance through evolved insights.

- Organised Best Safety Practices Conclaves for horizontal information sharing.

- Deployed Tata Power’s Safety Management System in JVs and Subsidiaries.

- Used a focussed approach on unsafe work stoppage to eliminate the hazard at source.

- Competency building and site safety enhancement of renewable sites.

12. SUSTAINABILITY

Taking forward the century old legacy of being a responsible corporate citizen, your Company continued its journey of practising sustainability in alignment with the core value of Leadership with Care. For your Company, sustainability is about care for the environment, customers and shareholders, community and for our people.

The Company’s efforts on sustainability were recognized at various platforms and a testimony to this were the various awards bestowed upon it. Your Company was ranked 6th in the Responsible Business Ranking for Sustainability and CSR released in November 2018 and won the ICSI CSR Excellence Award 2018 (in medium category) conducted by the Institute of Company Secretaries of India. Your Company also bagged the 2018 CSR Award for Education and Energy Conservation constituted by Indo-American Chamber of Commerce and Industry. Your Company also got the Social Impact Award for CSR for promoting Best Sanitation Practices at Asia Level and Best Sustainable Green Initiative for the Mahseer conservation program by ACEF Forum 2018.

12.1. CARE FOR OUR COMMUNITY/COMMUNITY RELATIONS

Your Company actively worked on five thrust areas viz. education, health and sanitation, livelihood and skill building, water and financial inclusivity in which fifteen flagship interventions were undertaken in the vicinity of the Company’s business presence and beyond, while maintaining focus on Affirmative Action (AA) initiatives of the Tata group.

The CSR policy of the Company has been provided on the Company’s website at https:// www.tatapower.com/corporate/ policies.aspx (alternatively, scan the adjacent QR code using a mobile device to read the policy on the Company website).

The Company’s standalone CSR spend for FY19 stood at Rs. 12.66 crore against the Act requirement of Rs. 12.65 crore.

Details of the consolidated CSR activities of your Company and its key subsidiaries are listed in the MD&A section of this annual report. The annual report on CSR activities (standalone) is provided in Annexure-II to this Report.

12.2. AFFIRMATIVE ACTION

Under its Affirmative Action (AA) program, your Company continued to focus on upliftment of dalit and tribal communities through 5Es under AA viz. Employment, Entrepreneurship, Employability, Education and Essential Amenities around its operating sites.

As part of the enhanced focus, Tata Power Skill Development Institute (TPSDI) inducted 25% trainees from AA communities and achieved more than 80% placements post-training. In total, 1.3 lakh beneficiaries were covered under AA.

Around 1,050 women were covered under ‘Dhaaga’, a Women Empowerment initiative. Out of this, 20% women were from AA communities and were provided training on garment making, traditional handicrafts and other income generation initiatives which helped them generate Rs. 2,500 as average monthly income.

Besides this, your Company also engaged in nurturing vendors and suppliers from AA communities to help with job creation.

12.3. CLUB ENERJI

Tata Power’s Club Enerji is focused on school students to help champion the noble cause of resource conservation and to enhance moral and civic values. The Club has been working ceaselessly towards creating responsible citizens of tomorrow who focus on conserving energy and natural resources, waste management, combatting climate change and active citizenship. Yearly theme for FY19 was ‘Saying No to Plastics’.

Recognizing the immense value that schools can bring to the initiative and taking due consideration of social needs, the Company started ‘Tata Power Club Enerji’ in 2007 to propagate efficient usage of energy and to educate the society on climate change issues. The program has now reached out to 553 schools across Mumbai, Delhi, Pune, Ahmedabad, Bengaluru, Kolkata, Ajmer, Belgaum, Jamshedpur, Lonavala and five more cities. It has reached out to more than 2.38 crore citizens, collectively saved 29.8 million units. All over India, 2,000 mini clubs have also been formed under the Club Enerji initiative.

Some of key highlights this year include conducting rallies and skits based on resource conservation and saying no to plastics, session on urban bio diversity, a nationwide contest called “Bijli Bachao “which received more than 1,000 entries from India and abroad. Additionally, Club Enerji also collaborated with Yes Bank to spread the message of conservation across its branches. The program is also a case study in IIM Ahmedabad and has been featured at IIM-A’s TEDx event under the theme ‘Inspiring the Future’.

The initiative has won several domestic and international accolades and has also been recognized as a best practice within Tata group. In FY18, Club Enerji won the ABCI award for its module on active citizenship. It also won the prestigious ET CSR Leadership award under the category ‘Cause Branding’ and PRCI (Public Relations Council of India) award for the Club’s revamped website under the ‘Digital Newsletter’ category.

12.4. SUSTAINABILITY REPORTING

Your Company has adopted the Global Reporting Initiative (GRI) Standards for its upcoming Sustainability Report for FY19, which is currently under preparation, to report on sustainability performance specific to the Indian operations of your Company viz. generation, transmission and distribution. The Company’s Sustainability Reports can be accessed on the Company’s website at https://www.tatapower. com/sustainability/communication.aspx (alternatively, scan the adjacent QR code using a mobile device to read the policy on the Company website).

12.5. BUSINESS RESPONSIBILITY REPORT (BRR)

The Business Responsibility Reporting is in line with the SEBI requirement based on the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ notified by Ministry of Corporate Affairs (MCA), Government of India, in July 2011. Your Company reported its performance for FY19 as per the BRR framework, describing initiatives taken from an environmental, social and governance perspective.

12.6. PREVENTION OF SEXUAL HARASSMENT

Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 have been provided in the Report on Corporate Governance as well as MD&A.

13. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Change in Board Composition

Mr. Anil Sardana resigned as CEO & Managing Director of the Company effective close of business hours on 30th April 2018.

Mr. Praveer Sinha was appointed as CEO & Managing Director of the Company for a period of 5 years from 1st May 2018 to 30th April 2023. His appointment as CEO & Managing Director was approved at the 99th Annual General Meeting (AGM) by the Members.

Mr. Ashok S. Sethi has superannuated from the services of the Company w.e.f. close of business hours on 30th April 2019, on completing 65 years of age, as per the guidelines adopted by the Company for retirement of Executive Directors. Consequently, he has ceased to be COO & Executive Director of the Company effective the said date. The Board has placed on record its deep sense of appreciation of the valuable contribution made by Mr. Sethi to the operations and growth of the Company during his long association with the Company.

On the recommendation of the Nomination and Remuneration Committee (NRC), Mr. Ashok Sinha was appointed as Additional and Independent Director of the Company for a period of 5 years from 2nd May 2019 to 1st May 2024, subject to approval of the Members at the ensuing general meeting.

In accordance with the requirements of the Act and the Company’s Articles of Association, Mr. Banmali Agrawala retires by rotation and is eligible for re-appointment. Members’ approval is being sought at the ensuing AGM for his re-appointment.

Number of Board Meetings

Seven Board Meetings were held during the year under review. For further details, please refer to the Report on Corporate Governance, which forms a part of this Annual Report.

Independent Directors

In terms of Section 149 of the Act and the Listing Regulations, Mr. Nawshir H. Mirza, Mr. Deepak M. Satwalekar, Ms. Anjali Bansal, Ms. Vibha Padalkar, Mr. Sanjay V. Bhandarkar, Mr. K. M. Chandrasekhar and Mr. Ashok Sinha are the Independent Directors of the Company as on date. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act read with rules framed thereunder and Regulation 16(1)(b) of the Listing Regulations. In terms of Regulations 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation which exists or may be anticipated that could impair or impact their ability to discharge their duties.

At the AGM held on 13th August 2014, Mr. Mirza and Mr. Satwalekar were appointed as Independent Directors of the Company for a period of 5 years. Thus, they will hold office till 12th August 2019.

Key Managerial Personnel

In terms of Section 203 of the Act, the following are the Key Managerial Personnel (KMP) of the Company as on 31st March 2019:

- Mr. Praveer Sinha, CEO and Managing Director

- Mr. Ashok S. Sethi, COO & Executive Director (superannuated on 30th April 2019)

- Mr. Ramesh N. Subramanyam, Chief Financial Officer

- Mr. Hanoz M. Mistry, Company Secretary

Codes of Conduct for Directors and Employees

The Company has adopted a Code of Conduct for its Non-Executive Directors including a code of conduct for Independent Directors which suitably incorporates the duties of Independent Directors as laid down in the Act. The Company has also adopted the Tata Code of Conduct for its employees including the Managing and Executive Directors. The above codes can be accessed on the Company’s website at https:// www.tatapower.com/corporate/ policies.aspx (alternatively, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

In terms of the Listing Regulations, all Directors and senior management personnel have affirmed compliance with their respective codes. The CEO & Managing Director has also confirmed and certified the same, which certification is provided at the end of the Report on Corporate Governance.

14. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual Directors, pursuant to the provisions of the Act and Listing Regulations.

The performance of the Board was evaluated by the entire Board after seeking inputs from all the Directors on the basis of criteria such as the Board composition and structure, effectiveness of Board processes, information and functioning, etc. The performance of the Committees was evaluated after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc. The above criteria are based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5th January 2017.

In a separate meeting of Independent Directors, performance of Non-Independent Directors, the Board as a whole and the Chairman of the Company after taking into account the views of Executive Directors and Non-Executive Directors, was evaluated. The Board and the NRC reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In the Board meeting that followed the meeting of the Independent Directors and meeting of the NRC, the performance of the Board, its Committees, and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

Outcome of evaluation process

Based on inputs received from the members, it emerged that the Board had a good mix of competency, experience, qualifications and diversity. Each Board member contributed in his/her own manner to the collective wisdom of the Board, keeping in mind his/her own background and experience. There was active participation and adequate time was given for discussing strategy. Some of the directors felt that the grievance redressal mechanism of investors etc. required to be reviewed by the Board. Overall, the Board was functioning very well in a cohesive and interactive manner.

15. REMUNERATION POLICY FOR THE DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board, a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity and Director Attributes, which is provided in Annexure-III to this Report and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-IV to this Report.

16. COMMITTEES OF THE BOARD

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority.

The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee of Directors

- Nomination and Remuneration Committee

- Corporate Social Responsibility Committee

- Stakeholders Relationship Committee

- Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective committees are given in the Report on Corporate Governance, which forms a part of this Report. Further, during the year under review, all recommendations made by the Audit Committee have been accepted by the Board.

17. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The information on conservation of energy and technology absorption stipulated under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure - V to this Report.

18. PARTICULARS OF EMPLOYEES AND REMUNERATION

The information required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure - VI.

The information required under Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure forming part of this Report. In terms of the proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure are related to any Director of the Company.

Officers of the organisation are classified into five management work levels i.e. MA, MB, MC, MD and ME. The work levels are further divided into grades. Non management employees are across different grades and also have been classified as unskilled, semi-skilled, skilled and highly skilled.

19. RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same can be accessed on the Company’s website at https:// www.tatapower.com/corporate/ policies.aspx (alternatively, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

During the year under review, all transactions entered into with related parties were approved by the Audit Committee. Details of transactions with related party as per Form AOC-2 are provided in Annexure-VII to this Report.

20. DEPOSITS (Table 8)

Sl. No.

Particulars

Amount in Rs.

1.

Accepted during the year

Nil

2.

Remained unpaid or unclaimed at the end of the year*

2,58,105

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NA

- At the beginning of the year

- Maximum during the year

- At the end of the year

4.

Details of deposits which are not in compliance with the requirements of Chapter V of the Act

NA

21. LOANS, GUARANTEES, SECURITY AND INVESTMENTS

The Company, being an infrastructure company, is exempt from the provisions as applicable to loans, guarantees, security and investments under Section 186 of the Act. Therefore, no details are provided.

22. EXTRACT OF ANNUAL RETURN

Pursuant to Sections 92 & 134(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 is provided in Annexure-VIII to this Report.

The extracts of the Annual Return of the Company can also be accessed on the Company’s website at https:// www.tatapower.com/investor-relations/a nnual-return.pdf (alternatively, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

23. STATUTORY AUDITORS

At the 98th AGM held on 23rd August 2017, the Members had approved the appointment of M/s. S R B C & CO. LLP (SRBC), Chartered Accountants (ICAI Firm Registration No.324982E/E300003) as the Statutory Auditors for a period of 5 years commencing from the conclusion of the 98th AGM until the conclusion of the 103th AGM to be held in the year 2022. Pursuant to Sections 139 and 141 of the Act read with the Companies (Audit and Auditors) Rules 2014, SRBC has furnished a certificate of their eligibility and consent as the Auditors of the Company.

The standalone and the consolidated financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Act.

The Statutory Auditor’s report does not contain any qualifications, reservations, adverse remarks or disclaimers.

The Statutory Auditors were present at the last AGM.

24. BRANCH AUDITORS

Members’ approval is being sought vide Item No. 6 of the Notice, for authorizing the Board of Directors to appoint Branch Auditors for the purpose of auditing the accounts maintained at the Branch Offices of the Company abroad.

25. COST AUDITORS

Your Board has appointed M/s. Sanjay Gupta and Associates, Cost Accountants, as Cost Auditors of the Company for conducting cost audit for FY20. A resolution seeking ratification of remuneration payable to the Cost Auditors for FY20 is provided at Item No. 7 of the Notice of the ensuing AGM.

Pursuant to Section 148 of the Act, your Company carries out an annual audit of cost accounts relating to electricity. The Cost Audit Report and the Compliance Report of your Company for FY18, was filed on 13th August 2018 with the Ministry of Corporate Affairs through Extensive Business Reporting Language (XBRL) by M/s. Sanjay Gupta and Associates, Cost Accountants, before the due date of 30th September 2018. Further, the cost accounts and records as required to be maintained under Section 148 of the Act are duly made and maintained by the Company.

26. SECRETARIAL AUDITORS

M/s. Parikh & Associates, Company Secretaries, were appointed as Secretarial Auditors of your Company to conduct a Secretarial Audit of records and documents of the Company for FY19. The Secretarial Audit Report confirms that the Company has complied with the provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances.

The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks or disclaimers. The Secretarial Audit Report is provided in Annexure-IX to this Report.

As per the requirements of the Listing Regulations, Practicing Company Secretaries of the respective material subsidiaries of the Company have undertaken secretarial audits of these subsidiaries for FY19. The Audit Report confirms that the material subsidiaries have complied with the provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances.

27. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company confirms compliance with the applicable requirements of Secretarial Standards 1 and 2.

28. CORPORATE GOVERNANCE

Pursuant to Regulation 34 of the Listing Regulations and relevant sections of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors’ Certificate thereon are included in the Annual Report.

29. VIGIL MECHANISM

Your Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act and Regulation 4(2)(d)(iv) of the Listing Regulations, a Whistleblower Policy and Vigil Mechanism was established for directors, employees and stakeholders to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Company for redressal. The Company has revised the Whistleblower Policy to include “reporting of incidents of leak or suspected leak of unpublished price sensitive information” in terms of SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. The revised Policy was recommended by the Audit Committee and approved by the Board at their respective meetings. The updated policy has been posted on the Company’s website at https:// www.tatapower.com/corporate/ policies.aspx (alternatively, scan the adjacent QR Code using a mobile device to read the policy on the Company website). The Company affirms that no personnel have been denied access to the Audit Committee.

30. DIRECTORS’ RESPONSIBILITY STATEMENT

Based on the framework of IFC and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including audit of IFC for financial reporting by the statutory auditors and the reviews performed by management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company’s IFC were adequate and effective during FY19.

Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed and there are no material departures;

b) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively (refer section 10);

f) the Directors had devised proper systems to ensure compliance with the provision of all applicable laws and that such systems were adequate and operating effectively.

31. ACKNOWLEDGEMENTS

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our shareholders, customers, business partners, vendors - both international and domestic, bankers, financial institutions and academic institutions for all the support rendered during the year under review.

The Directors are thankful to the Government of India, the various ministries of the State Governments, the central and state electricity regulatory authorities, communities in the neighbourhood of our operations, municipal authorities of Mumbai, and local authorities in areas where we are operational in India; as also partners, governments and stakeholders in international geographies where the Company operates, for all the support rendered during the year under review.

Finally, we appreciate and value the contributions made by all our employees and their families for making the Company what it is.

On behalf of the Board of Directors,

N. Chandrasekaran

Chairman

Mumbai, 2nd May 2019 (DIN: 00121863)