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Power Finance Corporation Ltd.

BSE: 532810 Sector: Financials
NSE: PFC ISIN Code: INE134E01011
BSE 00:00 | 24 Apr Power Finance Corporation Ltd
NSE 05:30 | 01 Jan Power Finance Corporation Ltd
OPEN 91.80
PREVIOUS CLOSE 91.70
VOLUME 249341
52-Week high 138.80
52-Week low 78.70
P/E 3.79
Mkt Cap.(Rs cr) 24,038
Buy Price 90.50
Buy Qty 50.00
Sell Price 91.05
Sell Qty 20.00
OPEN 91.80
CLOSE 91.70
VOLUME 249341
52-Week high 138.80
52-Week low 78.70
P/E 3.79
Mkt Cap.(Rs cr) 24,038
Buy Price 90.50
Buy Qty 50.00
Sell Price 91.05
Sell Qty 20.00

Power Finance Corporation Ltd. (PFC) - Director Report


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Company director report

To

The Members

Power Finance Corporation Limited

The Board of Directors of your Company are pleased to present their 33rdAnnual Report on the performance of your company for the financial year ended March312019 along with Audited Financial Statements Auditor's Report Secretarial Auditor'sReport & report by the Comptroller and Auditor General of India.

1.0 FINANCIAL AND OPERATIONAL HIGHLIGHTS

(a) PROFITABILITY (Rsin crore)

Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Total Income 28851.29 25980.25 54156.83 48645.42
Profit Before Tax 9815.79 5845.11 17862.03 11779.44
Tax expenses 2862.87 1458.34 5221.76 2982.75
Profit After Tax 6952.92 4386.77 12640.27 8796.69
Owners of the Company - - 9920.86 6688.69
Non-Controlling Interests - - 2719.41 2108.00
Total Comprehensive Income 6745.95 4063.03 12372.52 8480.60
Owners of the Company - - 9681.81 6369.92
Non-Controlling Interests - - 2690.71 2110.68
(Rsin crore)
Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Opening balance of Surplus 3848.43 5184.72 6887.10 5467.43
Profit After Tax for the year 6952.92 4386.77 9920.86 6688.69
Re-Measurement of Defined Benefit Plans (1.94) 7.50 (8.57) 5.32
Transfer towards Reserve for Bad & Doubtful Debts u/s 36(1) (viia) (c) of Income Tax Act 1961 (353.42) (372.10) (497.44) (548.85)
Transfer to Special Reserve created and maintained u/s 36(1) (viii) of Income Tax Act 1961 (1577.91) (1595.06) (2274.58) (2428.00)
Transfer to Special Reserve created u/s 45-IC (1) of Reserve Bank of India Act 1934 (1390.58) (6.37) (1997.46) (6.37)
Transfer to Debenture Redemption Reserve (289.73) (292.65) (393.21) (396.13)
Transfer to General Reserve (1000.00) (1000.00) (1000.00) (1263.17)
Transfer to Interest Differential Reserve-KFW Loan (net) (2.10) (1.49) (2.10) (1.49)
Dividend 0.00 (2059.26) (1325.29) (3103.90)
Dividend Distribution Tax 0.00 (404.41) (299.35) (633.07)
Transfer from Debenture Redemption Reserve on account of utilization 2.30 0.00 2.30 0.00
Transfer from OCI- Equity Instruments 14.56 0.78 14.56 0.78
Other Comprehensive lncome/(Expense) - - (0.11) (0.04)
Reclassification of gain / loss on sale of equity instrument measured at OCI 2.85
Pooling of interest accounting for common control business combination - - - 3105.90
Closing Balance of Surplus 6202.53 3848.43 9029.56 6887.10

(b) LENDING OPERATIONS (excluding R-APDRP/IPDS)

(Rsin crore)

Particulars 2018-19 2017-18
Sanction 95230 116233
Disbursement 67678 64414

(c) INTEGRATED POWER DEVELOPMENT SCHEME (IPDS) OPERATIONS (R-APDRPscheme subsumed)

(Rsin crore)

Particulars 2018-19 Cumulative (upto March'19)
Sanctioned project cost
a. R-APDRP (2196) 35327
b. IPDS 3387 32059
Disbursement
a. R-APDRP 867 12017
b. IPDS 2713 7852

Note : Negative sanction in 2018-19 indicates reduction in cost \

Additionally funds worth Rs578 crore (cumulative) have been releasedunder J&KPMDP.

2.0 FINANCIAL PERFORMANCE 1

2.1 ADOPTION OF INDIAN ACCOUNTING STANDARDS (IND AS)

The Company adopted Ind AS from April 12018 and the effective date oftransition was April 12017. Accordingly the financial statements have been prepared inaccordance with the recognition and measurement principles of Ind AS prescribed undersection 133 of the Companies Act 2013 read with relevant rules issued thereunder. Thetransition to Ind AS has been carried out from the erstwhile Accounting Standards notifiedunder the Act read with relevant rules thereunder and directions issued by the RBI(collectively referred to as "Previous GAAP"). The impact of transition has beenaccounted for in the opening reserves as at April 12017. Results and financial figuresfor the corresponding period prepared under Previous GAAP stated in this Board Report andits attachments/annexures have been restated to Ind AS.

2.2 REVENUE

The total income achieved by your Company during the FY 2018-19 is Rs28851.29 crore as compared to Rs 25980.25 crore in FY2017-18. Out of it Revenue fromOperations forthe year isRs 28842.00 crore as compared to Rs 25975.85 crore in theprevious year.

2.3 EXPENSES /

The total expenditure for the FY 2018-19 amounted to Rs 19035.50 croreas against total expenditure ofRs 20135.14 crore in FY 2017-18. Out of it Finance costamounted to Rs 18981.76 crore in FY 2018-19 as compared to Rs 16955.89 crore in FY2017-18. This constituted 99.72% of total expenses in FY 2018-19 as compared to 84.21% inFY2017-18. During FY 2018-19 Employee Benefit expenses and other expenses which includesadministrative and office expenses were Rs 288.26 crore (1.51 % of total expenses and1.52% of finance cost) against Rs 248.08 crore (1.23% of total expenses and 1.46 %offinance cost) in the previous year.

2.4 PROFIT

During the FY 2018-19 your Company earned a net profit of Rs6952.92crore as compared to Rs4386.77 crore for the FY2017-18.

2.5 TOTAL COMPREHENSIVE INCOME

During the FY 2018-19 your Company earned total comprehensive incomeofRs6745.95 crore as compared toRs 4063.03 crore for the FY 2017-18.

2.6 SHARE CAPITAL

As on March 31 2019 the paid-up share capital of your Company was Rs2640.08 crore consisting of 2640081408 equity shares of Rs 10 each. During FY 2018-19Government of India (Gol) transferred 19372120 and 161954570 equity shares held inthe Company in connection with New Fund Offer to the Asset Management Company (AMC) ofBharat 22 ETF and CPSE ETF respectively. Consequently the Government of India'sshareholding came down from 65.92% to 59.05%. No dividend is recommended in FY 2018-19 ascompared to FY 2017-18 wherein the dividend payout amounted to Rs 2059.26 crore.

3.0 OPERATIONAL PERFORMANCE

Your Company sanctioned loans ofRs95230 crore during the FY 2018-19 toState Central Private and Joint Sector entities. An amount of Rs67678 crore wasdisbursed during the same period. With this as on March 31 2019 the cumulativesanctions amount to Rs762248 crore and cumulative disbursements amount to Rs587446crore.

In addition to above projects worth Rs3387 crore were sanctionedunder IPDS during FY 2018-19. An amount of Rs 2713 crore was disbursed under IPDS andRs867 crore under R-APDRP during the same period. With this cumulative approved projectcost amounts to Rs32059 crore under IPDS and Rs35327 crore under R-APDRP and cumulativedisbursements of Gol funds to utilities amount to Rs7852 crore under IPDS and Rs 12017crore under R-APDRP.

Your Company did not conduct any auction of its loan assets during FY2018-19.

3.1 LENDINGS (Excluding R-APDRP/IPDS)

3.1.1 Sector-wise (Rsin crore)

Category

2018-19

Cumulative upto March 2019

Sanctions Disbursements Sanctions Disbursements
State Sector 71971 58734 549291 428898
Central Sector 1221 819 46069 43778
Joint Sector 5976 3608 47692 34783
Private Sector 16063 4516 119196 79988
Total 95230 67678 762248 587446
3.1.2 DisciDline-wise (Rsin crore 1
2018-19 Cumulative upto March 2019
Category Sanctions Disbursements Sanctions Disbursements
Thermal Generation 10239 16059 324073 261376
Hydro Generation (>25MW) 2271 134 48460 34887
Renewable Energy 8139 3900 29129 20094
Renovation Modernization and Uprating of Thermal & Hydro Power Stations 443 152 12839 11052
Transmission 10351 4222 71873 39499
Distribution 26156 12778 76037 36568
Short Term Loan 12211 12401 82613 80460
Others* 25420 18032 117224 103510
Total 95230 67678 762248 587446

* Others include Medium Term Loan Transitional Finance Fuel SourcesDevelopment Funding of Regulatory Assets Buyer Line of Credit AssociatedInfrastructure Equipment Manufacturing Loan Computerization Loan for Redemption ofbonds Project settlement Purchase of power through PXI Loan for Asset Acquisition LoanAgainst Receivables Bill Discounting Studies Pre Investment Fund Technical AssistanceProject Decentralized Management etc.

3.2 Financial Assistance under IPDS/R-APDRP (Rsin crore)

2018-19 Cumulative upto March 2019
Scheme Approved project cost Disbursements* (Gol funds) Approved project cost Disbursements*

R-APDRP

Part A (IT) (219) 314 5156 4040
Part A (SCADA) - 48 1251 639
Part B (1977) 505 28920 7338
Sub - Total (2196) 867 35327 12017

IPDS

IPDS 3387 2713 32059 7852

*ln addition to above during FY 2018-19 X41 crore were released byMoP for nodal agency fee/ enabling activities under IPDS Rs59 crore under Part-Cincluding re-imbursement of PFC's actual expenditure of R-APDRP. Cumulatively MoP hasreleased an amount of Rs 166 crore for nodal agency fee/enabling activities under IPDSandt 471 crore under Part-C of R-APDRP.

The Moll targets agreed with MoP under IPDS/ R-APDRP for FY 2018-19 andactual achievements during the year is tabulated below:

SI.

FY2018-19

Cumulative

No. Moll Parameter Target Actual Target Actual
1 IPDS work completion (No. of Circles) 223 223+ 223 223+
2 IPDS Ph-ll implementation (No. of Towns) 350 365 350 365
3 Award of ERP work (No. of Utilities) 29 21* 29 21
4 Verification of Part-A IT completion by TPIEA-IT (No. of Towns) (Cum.) 605 357* 1400 1152
5 SCADA under Part-A completion (No. of Towns) (Cum.) 30 27* 55 52
6 Capacity Building (Mandays) 5000 5022 - -

*Note : MoP has approved relaxation of shortfall in achievement of Molltargets due to external factors

1.0 REALISATION

Your Company gives utmost priority to the realisation of its duestowards principal interest etc. under various financial assistance such as rupee termloans working capital lease financing foreign currency loans loans for equipmentfinancing and guarantee fee. The Recovery Rate for the performing loan assets for the FY2018-19 is 99.01 %.

Provisioning on Stage-Ill Loan Assets has been decreased by an amountof Rs780 crore during the year. The Company has madeatotal provision ofRs 15021 crore(excluding LoC) towards Stage-Ill Loan Assets against Loan Assets in its Annual Accountsupto the year 2018-19. After making provision on Stage-Ill assets the level of netStage-Ill Assets has been recorded at Rs 14332 crore which is 4.55% to the Total GrossLoan Assets as on March 312019.

In addition to above yourcompany has also made a provision ofRs857crore andRs303 crore on Stage-I Loan Assets and Stage-ll Loan Assets respectively as onMarch 312019 which would strengthen PFC's balance sheet by providing a adequateprovisioning and inspire higher levels of confidence amongst investors regulators andother stakeholders in yourcompany.

5.0 BORROWINGS

5.1 DEPOSITS

Your Company is a non-deposit taking NBFC and thus has not acceptedany public deposits during the FY 2018-19. Further no Perpetual Debt Instruments (PDI)were issued by your company during FY 2018-19.

5.2 BORROWINGS FROM DOMESTIC MARKET

The maior borrowinqs from Domestic market durinq the FY2018-19 areqiven as follows:- (Rsin crore)

S. No. Source Amount
1. Commercial Paper (CP) *9634.38
2. Bonds -Private Placement (Taxable) 25862.50
3. Bonds -Private Placement (Sec 54 EC) 491.95
4. Term Loans 41979.00
TOTAL 77967.83

‘Excluding CP raised and repaid during the year ofRs 22199.71crore

5.3 CASH CREDIT/ OVERDRAFT FACILITIES

For day to day operations your company continued to follow prudentstrategies for optimum utilization of fund based resources. To hedge any financialliquidity bottlenecks ample credit lines to the tune of T 14600 crore were available ason March 312019 by various scheduled commercial banks to the company for short termfunding which do not bear any commitment charges towards unutilized limits.

5.4 EXTERNAL BORROWINGS

The foreign currency denominated borrowinqs durinq FY2018-19 are asfollows: (Rsin crore)

S. No. Source Amount
1. Bonds under MTN / GMTN programme 5568
2. Syndicated Loans 2883
3. FCNR(B) loans* 2031
TOTAL 10482
* FCNR(B) Loans are not external borrowing in terms of ECB guidelines issued by RBI

Green Bonds

PFC's Green Bond Framework was established in October 2017 as approvedby Climate Bonds Initiative London UK. Your Company issued its first USD Green bond inDecember 2017 and raised US $400 million at a coupon of 3.75% and these bonds are listedon the London Stock Exchange's new International Securities Market (ISM) and SingaporeStock Exchange. The funds raised have been utilized to finance renewable energy projectsas per the "Eligible Projects'' under PFC's Green Bond Framework. As at March312019 outstanding loan balances of Solar & Wind energy projects funded by PFC areRs7484 crore and Rs6961 crore respectively.

5.5 EXTERNALLY AIDED PROJECTS

No loans have been availed from Multilateral/ Bilateral agencies duringFY2018-19. Outstanding balance from such agencies as at March 312019 is as follows:

Particulars Amount
KFWI EUR 6187159
Credit National EUR 6467904
ADB USD 11972518

6.0 PARTICULARS REGARDING CONSERVATION OF ENERGY. TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS & OUTGO

6.1 CONSERVATION OF ENERGY/TECHNOLOGYABSORPTION

There are no significant particulars relating to conservation ofenergy and technology absorption as your Company does notown any manufacturing facility.

6.2 FOREIGN EXCHANGE EARNINGS AND OUTGO

The Foreign exchange outgo aggregating Rs 1424.29 crore was made onaccount of debt servicing financial & other charges travelling and trainingexpenses.

The Foreign exchange earnings forthe FY2018-19were nil.

7.0 CREDIT RATING Domestic

Credit Ratings by Domestic credit rating agencies for domestic programof the Company as at March 312019:

S. No. Rating Agency Long Term Rating Short Term Rating
1. CRISIL CRISILAAA CRISIL A1 +
2. ICRA ICRA AAA ICRAA1 +
3. CARE CARE AAA CAREA1 +

International

Long term foreign currency issuer rating assigned to the Company as atMarch 312019:

S. No. Rating Agency Rating
1. Fitch Ratings BBB-
2. Standard & Poor (S&P) BBB-
3. Moody's Baa3

The rating as mentioned above stands same during the year.

8.0 RISK MANAGEMENT

8.1 ASSET LIABILITY MANAGEMENT

Your Company has put in place an effective Asset Liability ManagementSystem and constituted an Asset Liability Management Committee (ALCO) headed by Director(Finance). ALCO monitors risks related to liquidity and interest rate and also monitorsimplementation of decisions taken in the ALCO meetings. The Asset Liability Managementframework includes periodic analysis of long term liquidity profile of asset receipts anddebt service obligations. While the liquidity risk is being monitored with the help ofAsset Liability gap analysis the interest rate risk is managed by analysis of interestrate sensitive gap statements. Such analysis is made on quarterly basis in various timebuckets and is being used for critical decisions regarding the time volume and maturityprofile of the borrowings and creation of mix of assets and liabilities in terms of timeperiod (short medium and long-term) and in terms of fixed and floating interest rates.

The asset liability management maturity pattern of items of assets andliabilities as on March 31 2019 is set out below:

(Rsin crore)

Bucket Deposits/ Advances Domestic

Foreign Currency Items

as at March 31 2019 Investments Borrowings \ssetsLiabiliti< !S
Upto 30/31 Days 14133.64 4955.46 21785.18 0.00 696.50
Over 1 Month upto 2 Months 1833.07 1928.13 4915.00 0.00 0.00
Over 2 Months upto 3 Months 0.00 1264.76 7495.20 0.00 2080.35
Over 3 Months & upto 6 Months 0.00 9225.21 10292.05 0.00 0.00
Over 6 Months & upto 1 Year 0.00 16559.51 19088.10 0.00 3468.40
Over 1 Year & upto 3 Years 0.00 50663.28 76608.05 0.00 4971.67
Over 3 Years & upto 5 Years 0.00 49879.10 32730.60 0.00 9235.95
Over 5 Years 0.00 165146.63 87160.38 23.84 8373.99

8.2 FOREIGN CURRENCY RISK MANAGEMENT

Your Company has put in place Currency Risk Management (CRM) policy tomanage risks associated with foreign currency borrowings. The Company enters into hedgingtransactions to cover exchange rate and interest rate risk through various instrumentslike currency forwards options principal swaps and forward rate agreements.

As on March 312019 the details of outstanding foreign currencyliabilities are USD 3612 mn JPY 60079 mn & EUR 13 mn; out of which USD 2400 mn& JPY 9670 mn are hedged. Further 85% of the foreign currency portfolio withresidual maturity up to 8 years has been hedged.

8.3 INTEGRATED ENTERPRISE WIDE RISK MANAGEMENT

Your Company being a Financial Institution in the business of lendingto power sector is exposed to several risks in the course of its business. In this regardthe Company had put in place an Integrated Enterprise Wide Risk Management Policy (IRMpolicy). In order to implement the IRM Policy your company had constituted a RiskManagement Compliance Committee of Directors to monitor various risks arising in theoperations.

Under the IRM policy the Company has to identify the principal riskswhich may have an impact on its profitability/revenues. In this regard the Company hasidentified 11 significant risk parameters which arise from the Companies business modeland from its use of financial instruments. These risk parameters cover the majoroperational risks financial risks market risks regulatory risks etc. faced by theCompany and are regularly assessed as per the prescribed Risk Assessment Criteria. Tofacilitate this assessment Your Company has put in place a mechanism to ensure that theidentified risks are monitored carefully and managed efficiently.

.0 ULTRAMEGA POWER PROJECTS (UMPPs) AND INDEPENDENT TRANSMISSIONPROJECTS (ITPs)

9.1 UMPPs

Development of Ultra Mega Power Projects (UMPPs) with a capacity ofabout 4000 MW each adopting super critical technology is the initiative of Ministry ofPower (MoP) Government of India for which your Company has been designated as the 'NodalAgency1 and Central Electricity Authority (CEA) as the Technical Partner byMoP.

As on March 31 2019 17 UMPPs have been identified by MoP fordevelopment which are located in the states namely Madhya Pradesh (1) Gujarat (2)Chhattisgarh (1) Karnataka (1) Maharashtra (1) Andhra Pradesh (2) Jharkhand (2) TamilNadu (2) Odisha (3) Bihar (1) and Uttar Pradesh (1).

PFC Consulting Limited (a wholly owned subsidiary of PFC) inconjunction with MoP and CEAundertake preliminary site investigation activities landacquisition activities site specific studies to obtain appropriate regulatory and otherapprovals for land water coal block environment etc. necessary to conduct the biddingprocess. The successful bidder is then expected to develop and implement these projects.

PFC incorporated a total of 19 wholly owned Special Purpose Vehicles(SPVs) for the UMPPs. Out of these 14 Operating SPVs were incorporated to undertakepreliminary site investigation activities and obtain appropriate regulatory and otherapprovals for water environment etc. necessary to conduct the bidding process for theseprojects. These Operating SPVs are meant to be eventually transferred to successfulbidder(s) selected through a Tariff Based International Competitive Bidding Process inaccordance with the guidelines notified by MoP under section 63 of Electricity Act 2003.The successful bidders are then expected to develop and implement these projects. 5additional infrastructure SPVs were incorporated for holding the land and coal blocks forOdisha UMPP Cheyyur UMPP Deoghar and Tilaiya UMPP in Jharkhand and Bihar UMPP. Theseinfrastructure SPVs would be transferred to the respective procurers of power from theseprojects.

Out of the above 194 UMPPs have been transferred to successfulbidders.

9.2 ITPs

Ministry of Power has also initiated Tariff Based Competitive BiddingProcess for development and strengthening of Transmission system through private sectorparticipation.

The objective of this initiative is to develop transmission capacitiesin India and to bring in the potential investors after developing such projects to a stagehaving preliminary survey work identification of route preparation of survey reportinitiation of process of land acquisition for sub-stations if any initiation of processof seeking forest clearance if required etc.

30 Special Purpose Vehicles (SPVs) 2 by PFC and other 28 by PFCConsulting Limited have been established for ITPs. Out of these 30 SPVs 19 SPVs weretransferred to the successful bidders 6 SPVs for which bidding process are underprogress 4 SPVs are in process of closure and 1 SPV Bokaro-Kodarma Maithon TransmissionCompany Limited was liquidated in December 2010.

10.0 INTEGRATED POWER DEVELOPMENT SCHEME (with RESTRUCTURED ACCELERATEDPOWER DEVELOPMENTAND REFORM PROGRAMME fR-APDRPI SUBSUMED IN IT1

In order to provide impetus to strengthening of power distributionsector in urban area Ministry of Power Government of India launched "IntegratedPower Development Scheme" (IPDS) on December 3 2014. Following components arecovered under the scheme:

i) Strengthening of sub-transmission and distribution networks in theurban areas;

ii) Metering ofdistribution transformers/feeders/consumers in the urbanareas.

iii) IT enablement of distribution sector and strengthening ofdistribution network under R-APDRP for 12th and 13th Plans bycarrying forward the approved outlay for R-APDRP to IPDS.

iv) Schemes for Enterprise Resource Planning (ERP) and IT enablement ofbalance urban towns. Scope of IT enablement has been extended to all 4041 towns as perCensus 2011.

v) Smart metering solution for performing UDAY States and Solar panelson Govt buildings with net-metering.

vi) Gas Insulated switchgear(GIS) Sub-stations.

vii) Real Time-Data Acquisition System (RT-DAS) projects for accuratemeasurement of power interruption parameters like SAIDI/SAIFI.

Erstwhile R-APDRP Scheme has been subsumed in newly launched IPDSscheme.

The above excluding (iii) have an estimated outlay of T 32612 croreincluding a budgetary support of T 25354 crore from Government of India during the entireimplementation period.

R-APDRP scheme cost of Rs 44011 crore including a budgetary support ofT 22727 crore as already approved by CCEAwill be carried forward to the new scheme ofIPDS in addition to the outlay Rs32612 crore as indicated above.

Progress of implementation IPDS

Under IPDS Out of NIT issued worth Rs 28940 crore projects worth Rs27486 crore has already been awarded in 531 out of 546 sanctioned circles andimplementation has started in said circles. Further your company also sanctioned Rs753crore as counterpart loans and disbursed an amount of Rs 1650 crore under IPDS during theyear.

R-APDRP

With the measures taken so far 20 out of 21 Data Centers 20 out of 21Disaster Recovery Centres and 44 out of 46 Customer Care Centers (except Puducherry andOdisha) have been commissioned. Further 1378 towns have been declared Go-Live anddeclaration of Go-Live in balance 27 towns of Odisha(12)Tamil Nadu(8) Puducherry(4) andArunachal Pradesh(3) is under progress. In 1378 Go-live towns all business processsoftware modules are functional and energy audit reports are being derived from the ITsystem implemented underthe scheme.

During the year your company disbursed an amount of Rs 143 crore andcumulatively Rs 2662 crore as counterpart loan under Part-B of R-APDRP. Implementationwork of distribution system strengthening has been reported complete in 1195 towns out of1227 towns.

Cumulatively 57 out of 59 sanctioned SCADA Control Centers have beencommissioned and 52 out of 59 SCADA towns were completed.

The reduction in AT&C loss is already visible in 1081 R-APDRP towns(as per Post Go-Live reports) as on March 312019 because of establishment of IT systemand Part-B completion in various towns coupled with administrative and other measures.Thus your company shall be contributing towards improving financial health ofDistribution Utilities.

Other developments:

• Revamped IPDS web-portal with provision of on-line submission ofIPDS DPRs and maintaining MIS. The revamped portal also includes 7 post Go-Live parametersviz. AT&C loss reduction Consumer Grievance Redressal New Connection release Highloss feeders power reliability indices Feeder meter communication and digital paymentalong with their graphical analytics. These post Go-live parameters are being monitored onmonthly basis and States are being ranked based on improvement on these parameters thatare being shared in monthly RPM meetings. All the model documents guidelines Links forbidding documents of Utilities events etc. are regularly posted on dedicated IPDS webportal.

• A system has been developed in-house for web-based projectmonitoring of IPDS/ R-APDRP on IPDS web portal. Discoms are uploading award details workexecution details along with financial progress of the projects on the portal at regularintervals. MoP/ PFC is monitoring the progress of project implementation online throughthe system. New tabs have been added in the project monitoring system for monitoring of ITPhase-ll implementation Collection of ERP DPRs Capturing of counterpart fund and ownfund details under IPDS. Further new provisions made for fetching separate MIS reportsfor use of the Hon'ble MoSP (1C) MoP Officials and Utility officials.

• Capacity building/training of Utility personnel is also carriedout under IPDS - RAPDRP to enhance theirskill. Capacity Building programme was rolled-outin-house in which 5022 man-days achieved in FY 2018-19. PFC/MoP also organizes workshopson project management guidelines best practices etc. for dissemination of information.PFC/MoP also issues guidelines for simplification of implementation procedures. Largescale peer-learning workshop for sharing of best practices was also conducted by PFC.

• PFC on behalf of Ministry of Power has developed a Mobile AppURJA for Urban Power Distribution Sector to enhance Consumer Connect Project Monitoringof Urban Distribution Sector projects etc. The App broadly covers Consumer/DiscomsDashboard IPDS and R-APDRP monitoring. The App also depicts Town Wise AT&C Loss NewService Connection Consumer Complaints Redressal Feeder with Highest AT&C LossSAIDI SAIFI Feeder Meter Communication Town-wise E-Payment/Digital Payment of R-APDRPtowns and daily outage schedules in various Utilities. The web version of U RJ A is alsoavailable at www.uriaindia.co.in .

• Online Feeder Monitoring system has been developed as anintegral part of National Power Portal (NPP). NIC along with PFC is implementing theproject. The Feeder data of 49 Discoms in 29 States has been received and integrated onNPP. As on March 31 2019 Master data of 36673 feeders and transaction data of 31696Feeders uploaded by Discoms on NPP for urban towns. Reports based on said data are beinggenerated online and are being sent regularly to MDs of respective Discoms to enable themto initiate administrative actions for improvement.

• Coordination for adoption of toll free number1912 the shortcode for electricity complaints by all Utilities on pan-India basis. 1912 has alreadybeen implemented in all 62 Discoms (61 with all service providers). 1912 has beenimplemented as Toll free facility in 60 Discoms.

• PFC on behalf of Ministry of Power has engaged IPDS Consultantsas Urban Vidyut Abhiyanta (UVA) purely on contractual basis. There are 41 UVAs engagedwith PFC. PFC has deployed 38 UVAs in DISCOMs and 3 at PFC HQ to monitor IPDS projectimplementation. As per the direction of MoP vide its letter dated March 4 2016expenditure on appointment of UVAs are being borne by PFC. Process of appointment of 16UVAs/ Consultants is underway against resignation/attrition for filling up vacancies.

• Feeder Manager Recognition & Awards scheme under IPDS hasbeen instituted by Ministry of Power in order to recognize efforts of DISCOMs/ FeederManagers working towards reduction of AT&C loss. Feeder Managers are given this awardduring the Review Planning and Monitoring meeting by Hon'ble MoSP/ Secretary (Power) onthe basis of their performance w.r.t AT&C loss reduction/ Energy saving/ Revenuesaving on feeder. So far 65 Feeder Managers across DISCOMs have been awarded in the abovecategories on monthly basis for the period from Sept 2017 to Aug 2018. First FeederManager Workshop was held in Kodaikanal to share best practices among the feeder managersfrom 18-20th Jan 2018 and Second Feeder Manager Workshop was held from 28-30th Sept inPuducherry.

• IPDS guidelines envisaged appointment of Third Party Concurrentevaluating Agency (TPCEA) by PFC Nodal agency for concurrent and post implementationevaluation of the sanctioned IPDS schemes for assuring quality of work in projects beingcarried out by Utilities. PFC has completed appointment of TPCEA for states for smoothimplementation of the scheme. The appointment has been made after reverse e-auctionbidding for 15 groups covering 33 states/UTs across India. Stage -I inspection is alreadycompleted in 490 circles and Stage-ll inspection is underway in most Utilities.

Impact Assessment of RAPDRP /IPDS

In order to assess the impact of RAPDRP the Nodal agency was asked tocarry out detailed assessment on how the scheme has eased the life of consumers and hasbenefited the Discoms.

As per the Region-wise study conducted by the four independentconsultants

• Savings to the tune of Rs3052 crore in 2017-18 were estimatedfrom the AT&C loss reductions in the sampled 249 towns out of the total 1405 RAPDRPtowns

• Reduction in AT&C losses was reported in 90% of the sampledtowns.

• Nearly 100% AMR based metering achieved on all urban feeders.Focus shifted to Feeder level energy audit and intervention for AT&C loss reduction

• SCADAimplementation in largertowns lead to reduction in downtimein case of outages

• Centralized customer care centers established in 45 Utilitieshave simplified the processes and enhanced the service delivery to consumers.

• Introduction of Spot Billing Machines lead to reduction inbilling errors

• Manifold increase in Digital payments by consumers observed inmany Discoms

• Online gateways for payments complaints customer care etc.have done away with long queues and hours of waiting time and added ease of life toconsumers

• Establishment of universal customer support number"1912'' implemented by all Discoms.

• Large scale addition of Distribution Infrastructure resulted inimproved voltage profile and reliability of power supply.

• Extensive use of AB cabling was encouraged in implementation ofRAPDRP.

Further to check the quality of works of completed RAPDRP projectsQuality Council of India has also been appointed by MoP.

11.0 INITIATIVES TOWARDS REFORMS AND RESTRUCTURING Categorization ofUtilities

For purposes of funding your company classifies State/Central SectorGeneration Transmission Utilities & Project SPVs into A++ A+ A B C and'non-responsive' categories. The categorization (biannual) of State Power Generation andTransmission utilities is arrived based on the evaluation of utility's performance againstspecific parameters covering operational & financial performance including regulatoryenvironment generation of audited accounts etc.

With regard to State Power Distribution utilities (includingSEBs/utilities with integrated operations) your company's categorization policy providesfor adoption of MoP's Integrated Ratings by aligning such ratings/gradings with PFC'sstandard categories of A++ A+ A B and C.

The categorization enables your company to determine credit exposurelimits and pricing of loans to the state power utilities. As on April 25 2019 127utilities were categorized out of which 13 utilities were categorized as "A++"43 as "A+" 39 as "A" 17 as "B" 13 as "C" and 2as "non-responsive".

Annual Report on the Performance of State Power Utilities

Your Company compiles the Report on the Performance of State PowerUtilities (SPUs) on an annual basis. The latest report for the three years period endingon March 312018 is under compilation. The Report is a comprehensive study of theperformance of the State Power Utilities on key financial and operational parameters. TheReport contains key performance parameters e.g. profitability gap between average cost ofsupply and average realization (Rs./kwh) net worth capital employed receivablespayables capacity (MW) generation (Mkwh) AT&C losses (%) etc. and consumptionpattern of the sector at utility state regional and national level.

12.0 POLICY INITIATIVES

Your Company constantly reviews its policy framework so as to alignitself with the market requirements and also with its corporate objectives. In thisregard the following policy initiatives were undertaken during FY 2018-19:

• Your company has aligned its lending policy for the renewableenergy sector with the prevailing business environment so to enhance its market share.

• In order to expedite the appraisal process and to capture morebusiness in Solar & wind sector your company has introduced online screening of Solar& Wind proposals.

• The company has introduced market friendly policies forpre-payment & release of collateral securities to attract more business.

• Mechanism for the prompt payment to IPPs by Discoms is beingevolved on the advice of MoP.

• Review of appraisal system including project & Promoterrating framework for Private Projects so as to make the appraisal process dynamic andalso more robust.

• An online system was introduced for banks to check LoC issued byPFC to safeguard against frauds in light of the recent events in banking industry w.r.t.LOU's.

13.0 PARTICULARS OF LOANS. GUARANTEES OR INVESTMENTS UNDER SECTION 186OF COMPANIES ACT. 2013

Your Company is exempt from the provisions of Section 186 of theCompanies Act 2013. However details of equity investments made during the FY2018-19 areas follows:-

• During the FY 2017-18 PFC had approved an additional investmentof Rs 241 crore towards equity contribution in Energy Efficiency Services Limited (EESL)a Joint Venture Company of NTPC PFC RECand POWERGRID. Out

of the above said approval PFC has subscribed 99000000 equityshares of Rs 10 each amounting to / Rs 990000000 in EESL's Rights Issue on April272018 under the first tranche and the same were allotted to PFC ( by EESLon July 22018.

• PFC has acquired 1039399343 equity shares of face value of Rs10 each at the rate of Rs 139.5036 per share amounting to Rs 144999950186 in REC onMarch 282019.

14.0 SUBSIDIARIES

• Your Company had been offering consultancy support to the PowerSector through its Consultancy Services Group (CSG) since October 1999. Leveraging theexperience of the CSG Unit and appreciating the growth in the services offered by theGroup and recognizing the potential of such services in reforming Power Sector yourCompany decided to organize the services as a distinct dedicated business entity.Accordingly PFC Consulting Limited (PFCCL) was incorporated in the form of a wholly ownedsubsidiary of your company on March 252008 in orderto give it requisite autonomy infunctions and flexibility in operations.

• To focus on additional business in the area of equity financingyour Company had incorporated Power Equity V Capital Advisors Private Limited (PECAP) awholly owned subsidiary. However it has not been able to transact

any business due to lack of business proposals even after itsacquisition by PFC and accordingly approval has M been sought from MoP for dissolving andgetting the name of the Company struck off from the records of Registrar of Companies.Ministry of Power (MoP) Government of India (Gol) vide its letter no F.No.7/13/2012-PFCDesk(1) dated March 19 2019 has conveyed its approval for dissolving/striking off thename of PECAP from the records of Registrar of Companies under the provisions of section248 to 252 of the Companies Act 2013. The same is under process.

• Pursuant to the order of Ministry of Corporate Affairs datedFebruary 5 2019 PFC Capital Advisory Services Limited (PFCCAS a wholly owned subsidiaryof the Company) has been amalgamated with PFC Consulting Limited wholly owned subsidiaryof the Company w.e.f. the appointed date i.e. April 12018.

• Further pursuant to the order of Ministry of Corporate Affairsdated February 7 2019 PFC Green Energy Limited (PFCGEL a wholly owned subsidiary of theCompany) has been amalgamated with the Company from the appointed date i.e. April 12017.

• Further your Company is designated by Ministry of PowerGovernment of India as the 'nodal agency1 for V facilitating development ofUltra Mega Power Projects and its wholly owned subsidiary i.e. PFC Consulting Limited

is the 'Bid Process Coordinator' for Independent transmission projects.As on March 31 2019 for the said Z' purpose the following Special Purpose Vehicles(SPVs) have been incorporated as subsidiaries/deemed subsidiaries of the Company:

i) Chhattisgarh Surguja Power Limited (Previously known as AkaltaraPower Ltd.)

ii) Coastal Karnataka Power Limited

iii) Coastal Maharashtra Mega Power Limited

iv) Coastal Tamil Nadu Power Limited

v) Orissa Integrated Power Limited

vi) Sakhigopal Integrated Power Company Limited

vii) Ghogarpalli Integrated Power Company Limited

viii) Tatiya Andhra Mega Power Limited l

ix) Deoghar Mega Power Limited

x) Cheyyur Infra Limited

xi) Odisha Infrapower Limited

xii) Deoghar Infra Limited

xiii) Bihar Infrapower Limited

xiv) Bihar Mega Power Limited

xv) Jharkhand Infrapower Limited

xvi) Ballabhgarh-GN Transmission Company Limited*

xvii) Tanda Transmission Company Limited *

xviii) Mohindergarh-Bhiwani Transmission Limited*

xix) South-Central East Delhi PowerTransmission Limited*

xx) Bijawar-Vidarbha Transmission Limited*

xxi) Shongtong Karcham-Wangtoo Transmission Limited*

xxii) Vapi II North LakhimpurTransmission Limited*

xxiii) Lakadia-Vadodara Transmission Project Limited*

xxiv) Bikaner-Khetri Transmission Limited*

xxv) Fatehgarh-IITransco Limited*

xxvi) Bhuj-ll Transmission Limited*

* wholly owned subsidiaries ofPFC Consulting Limited

• During the year the Company acquired 52.63% shareholding heldby the President of India (1039399343 equity shares of face valueRs 10/- per share) inREC Limited (REC) atRs 139.5036 per share for a total cash consideration of Rs144999950186/- on March 28 2019. By virtue of this investment the Company hasbecome the holding company of REC and REC has become subsidiary of PFC in terms of theprovisions of the Companies Act 2013. Consequently the following subsidiaries of REC ason March 31 2019 have also become subsidiaries ofPFC:

i) REC Transmission Projects Company Limited

ii) REC Power Distribution Company Ltd

iii) Koderma Transmission Limited

iv) MandarTransmission Limited

v) Dinchang Transmission Limited

vi) Chandil Transmission Limited

vii) Dumka Transmission Limited

viii) Bhind-GunaTransmission Limited

ix) Jam Khambaliya T ransco Limited

x) Ajmer PhagiTransco Limited

xi) WRSS XXI (A) Transco Limited

xii) Udupi Kasagode Transmission Limited

xiii) Khetri Transco Limited

xiv) Lakadia Banaskantha Transco Limited

• Further since PFC acquired REC on March 28 2019 the holdingof REC in Energy Efficiency Services Limited (EESL) i.e. 21.70% which when combined withPFC's share in EESLi.e. 36.36% amounts to 58.06%. Accordingly your company has sincebecome the holding company of EESL and EESL has become subsidiary of PFC in terms of theprovisions of the Companies Act 2013. Consequently the following subsidiaries of EESL ason March 31 2019 have also become subsidiaries of PFC:

i) Creighton Energy Limited

ii) EESL EnergyPro Assets Limited

iii) Anesco Energy Services (South) Limited

iv) EPAL Holdings Limited

v) Edina Power Services Limited

vi) Edina UK Limited

vii) Armoura Holdings Limited

viii) Edina Manufacturing Limited

ix) EdinaAcquisition Limited

x) Edina Limited

xi) Edina Australia Pty Limited

xii) Stanbeck Limited /

xiii) Edina Power Limited

14.1 PFC CONSULTING LIMITED

PFC Consulting Limited is mandated to promote organize and carry outconsultancy services to the Power Sector and is also undertaking the work related to thedevelopment of UMPPs. PFCCL has been nominated as the 'Bid Process Coordinator1forselection of developerfor the IndependentTransmission Projects (ITPs) by Ministry ofPower Gol.

The Services offered by PFCCL are broadly in the following areas:

• Advisory services on issues emanating from implementation ofElectricity Act 2003 like reform restructuring regulatory etc.

• Bid process management including Tariff based competitivebidding as per the Guidelines issued by MoP Gol for

various segments of Power Sector \

• Project-structuring/ planning/ development/ specific studiesimplementation monitoring efficiency improvement projects

• Human Resource Management Plans

• Organisation performance improvement plans

• Contract related services for power sector

• Financial management resource mobilization accounting systemsetc.

• Coal block development

• Renewable and non-conventional energy project developmentincluding "Waste to Energy" Projects

• Advisory Services for Distribution System Improvement Schemes

• Project Management Activities under IPDS and DDUGJY Schemes

• Detailed Project Reports and selection of Implementation Agencyfor Smart Grid

• Bidding under DEEP Portal for procurement of Power (for ShortTerm Medium Term & Pilot Schemes)

• Consultancy services relating to takeover & transfer ofequity

• Valuation of Land Bank & shares

• Assessment of Implementation of GST

• Energy Portfolio Management

• LIE LIA&TEVstudy

Till date consultancy services have been rendered to 68 clients spreadacross 24 States/UTs by PFCCL. The total numberof assignments undertaken as on date is125.

Further during the FY 2018-19 the total income of PFCCL was Rs70.17crore vis-a-vis Rs79.73 crore in the previous FY 2017-18 net worth of PFCCL as on March312019 was Rs 91.74 crore as compared to Rs 198.32 crore on March 312018 and the netprofit earned by PFCCL during FY 2018-19 was Rs 22.00 crore as against the correspondingnet profit ofRs 26.88 crore lastfiscal.

14.2 REC LIMITED '

PFC acquired 1039399343 equity shares of REC (representing 52.63% ofthe share capital of REC Limited) from President of India at a consideration of Rs144999950186/- at the rate of Rs 139.5036 per share on March 282019.

Power Finance Corporation Ltd. has since become the holding company andalso a promoter of REC.

REC is also a Navratna Central Public Sector Undertaking under theMinistry of Power and one of the leading infrastructure finance company. REC is also aSystemically Important Non-Deposit Accepting Non-Banking Finance Company (NBFC)registered with Reserve Bank of India (RBI) as an Infrastructure Finance Company

(IFC). Its business activities involve financing projects in thecomplete power sector value chain be it generation transmission or distribution. RECprovides financial assistance to state electricity boards state governmentscentral/state power utilities independent power producers rural electric cooperativesand private sector utilities.

REC sanctioned loans ofRs 115957 crore during the FY 2018-19 and anamount of Rs72165 crore was disbursed during the same period.

Further during the FY 2018-19 the total income of REC was Rs25341.16 crore vis-a-vis Rs 22467.35 crore in the previous FY 2017-18 and the net profitearned by REC during FY 2018-19 was Rs5763.72 crore as against the corresponding netprofit ofRs 4419.89 crore in last fiscal.

Further details about the operational and financial performance of theCompany are available on its website i.e. www.recindia.nic.in .

14.3 ENERGY EFFICIENCYSERVICES LIMITED

Energy Efficiency Services Limited (EESL) was incorporated on December10 2009. EESL was jointly promoted by Power Grid NTPC REC and PFC with 25% equity stakeeach for implementation of Energy Efficiency projects in India and abroad. Theshareholding of your company as on March 312019 is 36.36%.

Consequent upon acquisition of controlling stake in REC Limited (REC)on March 28 2019 EESL has been reclassified from associate to a subsidiary companyduring the year as the Company holds 36.36% ownership interest and its subsidiary RECholds 21.70% ownership interest as on March 312019.

Further during the FY 2018-19 the total income of EESL was Rs 1935.67crore vis-a-vis Rs 1410.70 crore in the previous FY 2017-18 net worth of EESL as on March312019 wasRs839.97 crore as compared to Rs644.43 crore on March 31 2018 and the netprofit earned by EESL during FY 2018-19 was Rs 95.10 crore as against the correspondingnet profit ofRs39.46 crore last fiscal.

15.0 JOINT VENTURES. ASSOCIATE COMPANIES AND OTHER MAJOR INVESTMENTS

15.1 PTC INDIA LIMITED

PTC India Limited (PTC) was jointly promoted by Power Grid NTPCNHPCand PFC. PFC has invested Rs 12 crore in PTC which is 4.05% of PTC's total equity. PTCis the leading provider of power trading solutions in India a Government of Indiainitiated public-private partnership whose primary focus is to develop a commerciallyvibrant power market in the country. During the FY 2018-19 PTC maintained its leadershipposition with trading volumes of62.49 BUs. PTC has reported profit after tax ofRs 262.32crore for the FY 2018-19.

15.2 POWER EXCHANGE INDIA LIMITED

Power Exchange India Limited (PXIL) is India's first institutionallypromoted Power Exchange that provides innovative and credible solutions to transform theIndian Power Markets. PXIL provides nation-wide electronic exchange for trading of powerand handles power trading and transmission clearance simultaneously it providestransparent neutral and efficient electronic platform. PXILoffers various products suchas Day Ahead Day Ahead Contingency Any Day Intra Day and Weekly Contracts. PXILprovides trading platform for Renewable Energy Certificates. PFC's investment in equityshares of PXIL as on March 312019 isRs3.22 crore. Due to erosion of Net Worth of PXILPFC has provided the entire investment amount ofRs3.22 crore as provision for diminutionin the value of investment in its books.

15.3 SHREE MAHESHWAR HYDEL POWER CORPORATION LIMITED

In June 2016 PFC being one of the lenders of Shree Maheshwar HydelPower Corporation Limited (SMHPCL) had enforced its legal rights as per the Pledge deeddated November 30 2006 as amended from time to time and subordinate loan agreement datedSeptember 29 2006 by invoking the shares pledged by the promoters of SMHPCL in favor ofPFC and by partial converting sub debt loan into equity shares. Upon invocation of pledgedshares and partial conversion of sub-debt the total shareholding of PFC in SMHPCL is131846779 equity shares of Rs 10 each representing 23.32% of paid up equity sharecapital of SMHPCL. However the matter is subjudice.

16.0 MEMORANDUM OF UNDERSTANDING WITH GOVT. OF INDIA

Your Company has been consistently accorded 'Excellent' Rating byGovernment of India since FY 1993-94 except for FY 2004-05. For the FY2017-18 yourcompany was accorded 'Excellent rating'. The rating for FY 2018-19 is still awaited.

17.0 PRESIDENTIAL DIRECTIVES

Ministry of Power vide its letter dated May 102018 issued PresidentialDirectives with regard to the pay scale revision for Board level and below Board levelexecutives w.e.f. January 12017 in accordance with DPE OMs dated August 3 2017 andAugust 4 2017. In line with the Presidential Directives the pay scales for Board leveland below Board level executives of your Company as well as other perks and allowancesetc. have been revised w.e.f. January 12017.

18.0 CORPORATE SOCIAL RESPONSIBILITY

The aim of your company's Corporate Social Responsibility andSustainability Policy (CSRand Sustainability Policy) is to ensure that your Companybecomes a socially responsible corporate entity committed to improving the quality of lifeof the society at large by undertaking projects for Sustainable Development mainlyfocusing on fulfillment of Power and Energy needs of the society.

PFC has implemented its CSR and Sustainability Policy with all itsearnest and zeal. To oversee the activities of CSR PFC has in place a Board levelCSR&SD Committee of Directors headed by an Independent Director. /

During the year PFC implemented wide range of activities in the fieldof Environment Sustainability Skill development ^

Sanitation Healthcare and supporting the differently abled. FurtherDPE vide OM dated December 10 2018 has C

instructed CPSEs to spend 60% of CSR budget for thematic programme(i.e. School Education and Healthcare for year ^

2018-19) preferably in aspirational districts. G

For the FY 2018-19 the Board had approved the CSR budget of Rs 148.15crore based on 2% of the average stand-alone 53

Profit Before Tax as per Companies Act 2013 excluding dividendreceived from other companies covered under and complying with Section 135 of the Act inline with Rule 2(f) (ii) of Companies (CSR Policy) Rules 2014. C

The projects sanctioned in a year are completed in subsequent years andthere is milestone linked payment to various J stages of completion of the project.Further as per the DPE guidelines the CSR Budget is non-lapsable and any unspentamountis carried forward to the next year for utilization for the purpose for which it wasallocated. ^

Accordingly the total amount to be spent in the financial yearamounted to Rs 279.38 crore (i.e. Rs 148.15 crore for l FY 2018-19 and Rs 131.23 crorecarried forward from previous years). However out of which Rs 100.50 crore was spentduring FY2018-19.

The CSR Report under Companies (CSR Policy) Rules is annexed withAnnual Report.

19.0 HRD INITIATIVES