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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Opg Power Ventures Plc | LSE:OPG | London | Ordinary Share | IM00B2R3RX72 | ORD 0.0147P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.125 | 1.19% | 10.625 | 10.25 | 11.00 | 10.70 | 10.575 | 10.625 | 272,199 | 08:00:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Electric Services | 58.68M | 7.45M | 0.0186 | 5.71 | 42.56M |
From Apr 2019 to Apr 2024
TIDMOPG
RNS Number : 8958C
OPG Power Ventures plc
22 October 2020
22 October 2020
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Final results for the year ended 31 March 2020
OPG (AIM: OPG), the developer and operator of power generation assets in India, announces its final results for the year ended 31 March 2020 ("FY20").
FY20 Highlights
-- Revenue up 9.5% to GBP154.0 million from GBP140.6 million in FY19 -- Total generation (including deemed) of 2.72 billion units (2.71 billion units in FY19)
-- Adjusted EBITDA of GBP3 1 . 2 million ( 20.3 % margin) compared with GBP35.3 million (25.1% margin) in FY19
-- Profit before tax from continued operations was GBP14.5 million compared with GBP16.9 million in FY19
-- Term loans principal debt repayment GBP18.0 million
-- Borrowings reduced with gross debt of GBP56.8 million*, compared to GBP80.4 million at 31 March 2019
Summary financial information
Hot Features
Premium
GBP million
FY 20 FY19
Revenue 154.0 140.6
Adjusted EBITDA ** 31.2 35.3
Profit before tax from continuing operations 14.5 16.8
Loss from discontinued operations, incl.
NCI (2.1) (1.0)
Profit for the year 8.0 14.0
Earnings per share (pence) 2.1 3.8
Gross debt * 56.8 80.4
---------------------------------------------- -------------- ----------
Total generation (billion kWh) 2.72 2.71
* Gross Debt of GBP56.8 million consists of long term loans of GBP49.9 million and working capital of GBP6.9 million
** See definition of Adjusted EBITDA on page 6
Post year end developments and highlights
-- Six months period to 30 September 2020 average Plant Load Factor ("PLF") was 46% (H1 FY19: 79%); in September 2020 PLF increased to 63%
-- In June 2020, approx. GBP21.0 million (Rs.2 billion) was raised through non-convertible debentures (NCDs) with a three year term and coupon rate of 9.85%; the NCD's proceeds were used to repay the FY21 and FY22 (i.e. up to March 2022) principal term loans obligations
-- Total receivables from TANGEDCO at 31st March 2020 of GBP16.4 million (Rs.1.5 billion) were fully collected; there are no overdue monthly invoices from TANGEDCO
-- At 30 September 2020 the Company's gross debt amounted to GBP43.8 million, comprised of GBP21.0 million of NCDs, GBP21.5 million of existing term loans, with scheduled repayments spread from June 2022 to June 2024, and working capital loans of GBP1.3 million
Arvind Gupta, Chairman said:
"We delivered strong operational FY20 results and achieved significant deleverage as promised to our shareholders. COVID-19 and the lockdown had a severe impact on overall industrial activity in India and OPG's operations at the beginning of FY21, but power demand gradually increased during the first half of FY21 and OPG remains profitable. We have worked hard to tackle the unprecedented challenges caused by COVID-19 and I am proud to report that we managed to significantly strengthen OPG's balance sheet with issue of NCDs and collecting receivables from TANGEDCO. This will enable OPG to resume cash dividend payments to the Company's shareholders in the medium term. I am pleased to report that our long term, profitable and sustainable business model remains unchanged."
Presentation
Dmitri Tsvetkov, CFO will be presenting at the Proactive One2One Virtual Forum at 6pm on Thursday 22nd October 2020. Attendees can register for the conference here:
https://event.webinarjam.com/register/692/gwwg2hx20
The presentation will be available for download from the Company's website: http://www.opgpower.com/
A recording of the conference call will subsequently be available on the Proactive Investors' and the Company's websites.
For further information, please visit www.opgpower.com or contact:
+91 (0) 44 429
OPG Power Ventures PLC 11211
Arvind Gupta / Dmitri Tsvetkov
Cenkos Securities (Nominated Adviser +44 (0) 20 7397
& Broker) 8900
Russell Cook / Stephen Keys/Cameron
MacRitchie
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Barney Hayward / Nick
Elwes
Chairman's Statement
Strong operational performance and profitability
As we have seen, the year was challenging amidst a turbulent macro environment. The Company has emerged stronger at the end, paving pathways for accelerated future growth. In spite of all the challenges during the year, the Company's strong operational performance and operating profitability in FY20 demonstrates that focusing on the existing operations and deleveraging remains the right strategy. The Company today is poised to be amongst the most successful and least leveraged power companies in India with world class assets and sustained profitability.
The Chennai plants' generation, including deemed generation, during FY20 was 2.7 billion units which is in line with the level achieved in FY19, with average Plant Load Factor ("PLF") at 75 per cent (FY19: 75 per cent). During FY20 average realised tariff was Rs5.67 (FY19: Rs5.41) 4.8 per cent higher than in FY19.
In FY20, the Group's revenue was GBP154.0 million (FY19: GBP140.6 million) and Adjusted EBITDA was GBP31.2 million (FY19: GBP35.3 million). Profit from continuing operations was GBP10.2 million (FY19: GBP15.0 million) and profit for the year was GBP8.0 million (GBP14.0 million).
This was the second year of operations of the Group's Karnataka solar projects (62MW) situated north of Bengaluru. A capacity utilisation factor of 18.5 per cent was achieved in FY20 (17 per cent in FY19).
Continued deleveraging
In 2018, the Board took the decision to focus on our profitable, long-life assets in Chennai, and to prioritise deleveraging as a method to grow shareholders' equity. Total borrowings during FY20 were reduced from GBP80.4 million to GBP56.8 million, comprising term loans of GBP49.9 million and working capital loans of GBP6.9 million.
Since the adoption of this strategy, additional shareholders' value of 15.6p per share was accrued during last three years on account of term loan repayments.
We will continue to use the cash generation of our existing operations to repay our debt and based on the revised term loans' repayments schedule we aim to be term loans free in calendar year 2024.
Indian economy
Being one of the most populous countries in the world, COVID-19 and the subsequent countrywide lockdown have caused severe disruption to the Indian economy. The economy continued to witness slowdown in growth due to successive lockdowns, movement restrictions, lower consumption and slow credit growth. Amid projections of a sharp contraction in the global economy, the International Monetary Fund ("IMF") projects the Indian GDP to contract by 10.3 per cent in fiscal year 2020 and projects the Indian economy to rebound in fiscal year 2021 with GDP growth of 8.8 per cent.
The Reserve Bank of India, the country's central bank and banking regulator, has taken several steps to reduce the negative impact of the lockdown on the economy through various monetary policy measures, including reduction in repo and reverse repo rates, moratorium on loan repayment, 90 days freeze on non-performing assets declaration, helping MSMEs through stimulus packages and credit line for incentivizing industries. These measures coupled with the easing of lockdown restrictions in a phased manner, will help economic activity to resume fully.
Power sector
During the initial lockdown the total power consumption reduced by approximately 25 per cent primarily due to a decrease in industrial demand for electricity on account of COVID-19 restrictions. As the restrictions were eased, power consumption gradually increased and in September 2020 country wide consumption grew by 5.6 per cent after a six month slump. Following the gradual recovery of the Indian economy, the power demand in the country is expected to grow driven by rising industrial demand. Further, demand revival will be driven by various reforms undertaken by the Government of India, viz., the UDAY scheme, 24*7 Power for All initiative and the Saubhagya scheme. On the energy generation front, coal is expected to remain a significant fuel source in the country's quest to provide power to every citizen.
Outlook
The Company delivered a robust operational performance and continued its scheduled repayment of term loans during FY20.
After the year end, in June 2020, the Group raised approximately GBP21.0 million (Rs.2 billion) through a non-convertible debentures ("NCDs") issue with a three years bullet repayment term and coupon rate of 9.85 per cent. The NCDs proceeds were used to repay the FY21 and FY22 (i.e. up to March 2022) principal term loans obligations. Total receivables from TANGEDCO for principal payment up to 31 March 2020 amounting to GBP16.4 million (Rs.1.5 billion) has been fully collected and there are no overdue monthly invoices from TANGEDCO. Collections from TANGEDCO were partly used to further prepay the term loans and partly for working capital requirements. Following these transactions, as at 30 September 2020 the Company's debt amounts to GBP42.5 million, comprised of GBP21.0 million of NCDs, GBP21.5 million of existing term loans, with scheduled repayments spread from June 2022 to June 2024, and working capital loans of GBP1.3 million . These two developments strengthened the Group's financial position and liquidity at this uncertain times caused by the COVID-19 pandemic.
COVID-19 has posed unprecedented and global challenges for all countries and the Indian economy is expected to contract during FY21, resulting in lower GDP and less demand for electricity. We have been working tirelessly to implement plans to limit the human, financial and commercial consequences of COVID-19. We have initiated significant cash conservation initiatives across the Group, whilst ensuring the health and safety of all our employees to secure our long term sustainability. These initiatives have improved the liquidity position of the Company which, together with support from our lending institutions, put the Group in a stronger position to manage the difficult market conditions.
During the six month period to 30 September 2020, Company operated at average PLF (incl. deemed), of 46 per cent which in September 2020 increased to 63 per cent. We expect that the Company's FY21 generation and average realised tariff will reduce in comparison with FY20. However, the Company is likely to benefit from the projected lower coal prices and freight rates and remains profitable. We expect that medium-term and long-term fundamentals remain unchanged and post-COVID-19 recovery, the Company expects to prosper as management seeks to deliver its long term, profitable and sustainable business model.
I would like to thank, all of our employees, vendors, banks and all stakeholders for the incredible support we have received during these unprecedented and extraordinary times.
Arvind Gupta
Chairman
22 October 2020
FINANCIAL REVIEW
The following is a commentary on the Group's nancial performance for the year.
Income statement
========================================== ======= ========= ------------------------
2020 % of 2019 % of
revenue revenue
========= ===============
Year ended 31 March GBPm GBPm
========================================== ======= ========= ======= ===============
Revenue 154.0 140.6
Cost of revenue (excluding
depreciation) (90.0) (91.7)
========================================== ======= ========= ======= ===============
Gross profit 64.0 41.5 48.9 34.8
Other income 0.7 2.6
Distribution, general and administrative
Expenses, expected credit loss
(excluding depreciation and
share-based compensation) (33.5) (16.2)
Adjusted EBITDA (see definition
on page 6) 31.2 20.3 35.3 25.1
Share-based compensation (0.8)
Depreciation and amortisation (6.3) (6.1)
Net finance costs (9.5) (12.4)
========================================== ======= ========= ======= ===============
Profit before tax from continuing
operations 14.5 9.4 16.8 11.9
Taxation (4.3) (1.8)
========================================== ======= ========= ======= ===============
Profit after tax from continuing
operations 10.2 6.6 15.0 10.7
========================================== ======= ========= ======= ===============
Loss from discontinued operations,
incl. Non-Controlling Interest (2.1) (1.0)
Profit for the year 8.0 14.0
========================================== ======= ========= ======= ===============
Note: Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Revenue
The Group's revenue has increased by GBP13.4 million, re ecting a 9.5% growth year on year as a result of full year impact of increase in tariff during FY19. Average tariff realised during FY20 increased to Rs5.86 per kWh, as a result of full year impact of tariff increases during October 2018 for captive users and additional contractual claims to TANGEDCO. Generation exported to customers and billed for revenue, including deemed generation, was in the same range of 2.72 billion units during FY20 in comparison with FY19 generation.
Production and output levels from the Group's operating power plant in Chennai compared to the prior year were as follows:
Particulars FY20 FY19 ============================================ ===== ===== Total generation, incl. "deemed" generation (million units) 2,716 2,705 ============================================ ===== ===== Plant Load Factor (PLF) (%)(1) 75 75 ============================================ ===== ===== Average tariff (INR/unit) (2) 5.86 5.56 ============================================ ===== =====
1 Chennai Unit 3: "Deemed" PLF (%) has been included
2 Average tariff includes effect of deemed offtake tariff for Chennai Unit 3. Average FY20 tariff excluding effect of deemed offtake was Rs5.67 (FY19: Rs5.41).
Gross pro t and Adjusted EBITDA
Gross pro t ('GP') in FY20 was 41.5% of revenue (FY19: 34.8%). The increase in GP is primarily on account of the full year impact of the increase in tariff during FY19, additional contractual claims to TANGEDCO and reduction of cost of coal.
Adjusted earnings before interest, taxation, depreciation and amortisation ('Adjusted EBITDA') is a measure of a business' cash generation from operations before depreciation, interest and exceptional and non-standard or non-operational charges, e.g. share based compensation, etc. Adjusted EBITDA is useful to analyse and compare profitability among periods and companies, as it eliminates the effects of financing and capital expenditures.
Adjusted EBITDA was GBP31.2 million in FY20 a decrease from GBP35.3 million in FY19. The Adjusted EBITDA margin was lower at 20.3% in FY20 against 25.1% in FY19 primarily on account of increase in expected credit loss on trade receivables with respect to contractual claim made on a customer towards change in law as per the Power Purchase Agreement of GBP6.4 million, tariff discount dispute of GBP7.5 million and change in credit risk of customers of GBP3.1 million.
Profit from continuing operations before tax was GBP14.5 million compared with a profit from continuing operations before tax of GBP16.8 million in FY19.
Profit before tax reconciliation ('PBT') (GBPm) FY 20
PBT 2019-20 14.5
PBT 2018-19 16.8
Decrease in PBT (2.3)
========================================================= =======
Increase in GP 15.1
Decrease in Other Income (2.0)
Increase in Expected Credit Loss, Distribution, General
& Administrative Expenses (18.0)
Decrease in Net Finance Costs 2.8
Increase in Depreciation and Amortisation (0.2)
Decrease in PBT (2.3)
========================================================= =======
Taxation
The Company's operating subsidiaries are under a tax holiday period, but are subject to Minimum Alternate Tax ('MAT') on their accounting profits. Any tax paid under MAT can be offset against future tax liabilities arising after the tax holiday period.
The tax expense during the year was GBP4.3 million comprised of current tax expense of GBP0.8 million and deferred tax expense of GBP3.5 million.
Profits after tax from continuing operations
Profits after tax from continuing operations have decreased by 32.0% in FY20 to GBP10.2 million due to increased provision for expected credit loss.
Assets Held for Sale and Loss from discontinued operations
62MW Karnataka solar projects
In FY18 four Karnataka solar projects (62MW) were commissioned. The Group has a 31% equity interest in these projects. During FY19, the Company obtained a right to buy an additional 30% equity interest in the solar projects following the achievement of the conditions precedent under the terms of the agreement. This right, in combination with other rights, provided substantive potential voting rights and investments in the underlying solar projects and were re-classified from associates to subsidiaries. Given the long term returns from solar projects and the level of capital investment required, the Board has decided to focus on the core thermal power plants business and announced its intention to dispose of the Karnataka solar projects. The Company initiated the process of disposal of the solar projects in the previous year which met all conditions of IFRS 5 for classification of the solar business as Assets held for sale at 31 March 2020. Accordingly, assets of GBP46.4 million and liabilities of GBP32.9 million were classified as assets and liabilities held for sale in the Consolidated Statement of Financial Position as at 31 March 2020 and their loss from operations of GBP0.3 million was also included in loss from discontinued operations in the Consolidated Statement of Comprehensive Income.
Impairment provision of investments in joint venture Padma Shipping
In 2014 the Company entered into a Joint Venture agreement with Noble Chartering Ltd ("Noble"), to secure competitive long term rates for international freight for its imported coal requirements. Under the arrangement, the company and Noble agreed to jointly purchase and operate two 64,000 MT cargo vessels through a Joint venture company Padma Shipping Ltd, Hong Kong ('Padma').
During FY18, the Joint Venture partner, due to a change in their group strategy, requested for the Joint Venture to be terminated and as the vessels were still under construction and OPG agreed with this proposal. During FY19 one of the vessels was sold by the shipping yard and during FY20 the second vessel has been sold. The Padma joint venture will be terminated and dissolved in due course.
OPG has invested approximately GBP3.5 million in equity and GBP1.7 million to date as advance to Padma and the joint venture has been reported using equity method as per the requirements of IFRS 11. The Company recognised an impairment provision in FY20 financial statements of GBP0.9 million (FY19: GBP1.0 million) against its investment to date, including its advance to Padma Shipping, resulting in impairment of the entire investment of GBP5.2 million on account of the impending dissolution of the joint venture.
Earnings per Share (EPS)
The Company's total reported EPS decreased to 2.11 pence from 3.81 pence primarily due to higher provision for expected credit loss on trade receivables and loss from discontinued operations in FY20.
Dividend
The Company has issued 12,823,311 (2019: 31,601,503) shares during FY19 with respect to a scrip dividend at par value of GBP0.000147 (2018: GBP0.000147) per share amounting to GBP1,885 (2019: GBP4,646). The difference between fair value of shares issued above par value of GBP2,325,567 (2019: GBP3,558,442) with respect to the scrip dividend was credited to share premium.
Foreign exchange loss on translation
The British Pound-to-Indian Rupee exchange rate has moved higher to a closing rate on 31 March 2020 of GBP1= INR 93.07 as against GBP1= INR 90.28 on 31 March 2019 thereby resulting in exchange loss of GBP4.6 million on translating foreign operations.
Property, plant and equipment
The decrease in net book value of our property, plant and equipment of GBP11.6 million principally relates to depreciation and foreign exchange impact on account of translation during the year offset by additions.
Other non--current assets
Other non-current assets (excluding Property, plant and equipment & Intangible assets) have decreased by GBP0.5 million primarily due to decrease in non-current portion of restricted cash.
Current assets
Current assets have decreased by GBP36.4 million from GBP139.7 million to GBP103.3 million year on year primarily as a result of the following:
-- Increase in inventory holdings by GBP4.3 million. -- Decrease in Assets held for sale by GBP4.1 million. -- Decrease in trade and other receivables by GBP22.3 million. -- Decrease in cash and bank balances (including restricted cash) by GBP14.3 million.
Liabilities
Current liabilities have decreased by GBP10.8 million from GBP109.7 million to GBP98.9 million year on year primarily due to trade payable and assets held of sales.
Non-current liabilities have decreased by GBP41.7 million from GBP80.7 million to GBP39.0 million year on year primarily on account of repayment of borrowings and reduction in provision for pledged deposit, offset with restricted cash.
Gross debt, gearing and nance costs
As of 31 March 2020, total borrowings were GBP56.8 million (31 March 2019: GBP80.4 million). The gearing ratio, net borrowings (i.e. total borrowings minus cash)/(equity plus borrowings), was 25% (31 March 2019: 34%). Gearing ratio is a useful measure of financial risk of the Company.
Total borrowings (current and non-current portions) decreased by GBP23.6 million due to the repayment of term loans of GBP18.0 million, the decrease in working capital loans of GBP3.5 million and foreign exchange impact of depreciation of INR against GBP.
The Company achieved a major milestone with respect to Unit 1 of Chennai plant (77 MW out of 414 MW) as the term loans were fully repaid in December 2018. Based on the revised term loans repayments schedule the Chennai plant is expected to be debt free in calendar 2024.
Finance costs have decreased by GBP3.1 million from GBP14.6 million in FY19 to GBP11.5 million in FY20 primarily due to the impact of the decrease in foreign exchange losses and reduction in interest expense following scheduled repayments of term loans. Finance income decreased from GBP2.2 million in FY19 to GBP2.0 million in FY20 and therefore net finance costs in FY20 amounted to GBP9.5 million (FY19: GBP12.4 million).
The restricted cash balances totaling GBP7.5 million at 31 March 2020 (31 March 2019: GBP23.5 million) is comprised of financial deposits that have been pledged as security for Letters of Credit. Reduction in restricted cash is primarily due to an offset of financial deposits, pledged as a security for BVP's borrowings, against an impairment provision made in previous years.
Cash ow
Cash flow from continuing operations before and after changes in working capital were GBP48.2 million (FY19: GBP35.7 million) and GBP30.6 million (FY19: GBP28.1million) respectively. Net cash flow from operating activities has increased from GBP28.1 million in FY19 to GBP30.6 million in FY20, an increase of GBP2.5 million, primarily due to increase in gross profit.
Movements (GBPm) FY20 FY19 ================================================== ======= ======= Operating cash flows from continuing operations before changes in working capital 48.2 35.7 Tax paid (0.8) (0.6) Change in working capital assets and liabilities (16.8) (7.0) Net cash generated by operating activities from continuing operations 30.6 28.1 Purchase of property, plant and equipment (net of disposals) (0.6) (1.5) Investments sold/(purchased), incl. in solar projects, market securities, movement in restricted cash and interest received 3.5 1.2 Net cash from/(used in) continuing investing activities 2.9 (0.3) Finance costs paid (9.9) (14.8) -------------------------------------------------- ------- ------- Total cash change from continuing operations before net borrowings 23.6 13.0 -------------------------------------------------- ------- -------
Post - reporting date events
The Group raised approximately GBP21.0 million (Rs2 billion) during June 2020 through non-convertible debentures (NCDs) issue with a three years term and coupon rate of 9.85%. The NCDs proceeds was used to repay the FY21 and FY22 (i.e. to March 2022) principal term loans obligations.
Post year end operations update and COVID-19 impact
Since the start of FY21, there has been a reduction in generation due to COVID-19 induced country wide lockdown which resulted in disruption in the economic activities and subsequent decrease in power demand from captive users. For the six months to 30 September 2020:
-- Average Plant Load Factor ("PLF") was 46% (H1 FY19: 79%); in September 2020 PLF increased to 63%
-- Average tariff was Rs5.60 (FY20: Rs5.67)
-- At 30 September 2020 the Company's gross debt amounted to GBP43.8 million, comprised of GBP21.0 million of NCDs, GBP21.5 million of existing term loans, with scheduled repayments spread from June 2022 to June 2024, and working capital loans of GBP1.3 million
-- Various cost reduction, efficiency improvement and liquidity improvement measures have been implemented to ensure sustainable operations
The Government of India with Reserve Bank of India (RBI) have announced various regulatory measures to help the industry. Subsequent to the year end, the RBI announced various regulatory measures (RBI COVID-19 Regulatory package which, inter alia, provides for rescheduling of payments towards term loans and working capital facilities for principal and interest) to mitigate the burden of debt servicing brought by disruptions on account of the COVID-19 pandemic and to ensure the continuity of viable businesses. The Group has opted for such measures for the deferment of payment of principal and interest on term loans and also interest on working capital loans.
In June 2020, the Group repaid the principal term loan obligation for FY 21 and FY 22 from NCDs proceeds and during the first few months of FY21 it collected total receivables outstanding at 31 March 2020 of approximately GBP16.4 million from its principle customer TANGEDCO and there are no overdue monthly invoices from TANGEDCO. These two developments strengthened the Group's financial position at this time of economic slowdown.
Dmitri Tsvetkov
Chief Financial Officer
22 October 2020
Consolidated statement of financial
position
As at 31 March 2020
(All amount in GBP, unless
otherwise stated)
As at As at
Notes 31 March 2020 31 March 2019
-------------------------------- ------ -------------- --------------
Assets
Non-current assets
Intangible assets 14 9,045 23,603
Property, plant and equipment 15 192,469,395 204,102,891
Other long-term assets 17 509,628 518,553
Restricted cash 20 26,645 517,271
193,014,713 205,162,318
-------------- --------------
Current assets
Inventories 19 11,480,099 7,151,366
Trade and other receivables 18 26,901,986 49,198,105
Other short-term assets 17 6,316,735 6,329,354
Current tax assets (net) 1,330,684 1,337,316
Restricted cash 20(b) 7,497,967 23,030,599
Cash and cash equivalents 20(a) 3,438,830 2,118,960
7(a),
Assets held for sale 7(b) 46,356,680 50,497,664
103, 322,981 139,663,364
-------------- --------------
Total assets 296, 337,694 344,825,682
============== ==============
Equity and liabilities
Equity
Share capital 21 58,909 57,024
Share premium 21 131,451,482 129,125,915
Other components of equity (1,322,987) 2,401,287
Retained earnings 27,818,474 21,916,422
Equity attributable to owners
of the Company 158,005,878 153,500,648
Non-controlling interests 497,955 882,759
Total equity 158,503,833 154,383,407
-------------- --------------
Liabilities
Non-current liabilities
Borrowings 23 33,081,456 51,495,208
Trade and other payables 24 169,373 14,235,485
Provision for pledged deposits 20(b) - 12,627,381
Deferred tax liabilities (net) 13 5,723,791 2,380,115
38,974,620 80,738,189
-------------- --------------
Current liabilities
Borrowings 23 23,746,229 28,869,722
Trade and other payables 24 41,663,989 45,474,814
Other liabilities 582,241 91,764
Liabilities classified as held
for sale 7(b) 32,866,783 35,267,786
98,859,241 109,704,086
-------------- --------------
Total liabilities 137,833,861 190,442,275
-------------- --------------
Total equity and liabilities 296, 337,694 344,825,682
============== ==============
The notes are an integral part of these consolidated financial statements
The financial statements were authorised for issue by the board of directors on 22 October 2020 and were signed on its behalf by
Arvind Gupta, Chairman Dmitri Tsvetkov, Chief Financial Officer
Consolidated statement of Comprehensive
Income
For the Year ended 31 March 2020
(All amount in GBP, unless otherwise
stated)
Year ended Year ended
31 March 31 March
2020 2019
Notes
-------------------------------------------------- ----------- ------------- -------------
Revenue 8 154,040,283 140,632,328
Cost of revenue 9 (90,060,252) (91,753,763)
Gross profit 63,980,031 48,878,565
------------- -------------
Other income 10 668,037 2,645,332
Distribution cost (9,209,987) (8,476,933)
General and administrative expenses (8,061,622) (6,955,960)
Expected credit loss on trade receivables 29 (17,046,480) (790,437)
Depreciation and amortisation (6,293,034) (6,064,374)
Operating profit 24,036,945 29,236,193
------------- -------------
Finance costs 11 (11,495,136) (14,586,917)
Finance income 12 1,962,692 2,207,480
------------- -------------
Profit before tax 14,504,501 16,856,756
Tax expense 13 (4,321,124) (1,819,387)
-------------
Profit for the year from continued
operations 10,183,377 15,037,369
------------- -------------
Loss from discontinued operations,
including Non-Controlling Interest 7(a)(b)(c) (2,146,275) (989,493)
Profit for the year 8,037,102 14,047,876
============= =============
Profit for the year attributable to:
Owners of the Company 8,229,504 14,020,364
Non - controlling interests (192,402) 27,512
8,037,102 14,047,876
============= =============
Earnings per share from continued operations
Basic earnings per share (in pence) 26 2.60 4.09
Diluted earnings per share (in pence) 2.59 4.09
Loss per share from discontinued operations
Basic earnings per share (in pence) 26 (0.50) (0.23)
Diluted earnings per share (in pence) (0.50) (0.23)
Earnings per share
-Basic (in pence) 26 2.11 3.81
-Diluted (in pence) 2.09 3.81
Other comprehensive income / (loss)
Items that will be reclassified subsequently
to profit or loss
Exchange differences on translating
foreign operations (4,560,097) 1,207,292
Items that will be not reclassified
subsequently to profit or loss
Exchange differences on translating
foreign operations, relating to non-controlling
interests (192,401) 961
Total other comprehensive income /
(loss) (4,752,498) 1,208,253
------------- ---------------
Total comprehensive income 3,284,604 15,256,129
============= ===============
Total comprehensive income / (loss)
attributable to:
Owners of the Company 3,669,407 15,227,656
Non-controlling interest (384,803) 28,473
3,284,604 15,256,129
============= ===============
The notes are an integral part of these consolidated financial statements
Consolidated statement of changes in equity
For the Year ended 31 March 2020
(All amount in GBP, unless otherwise stated)
Issued Foreign Total
capital currency attributable
(No. of Ordinary Share Other translation Retained to owners Non-controlling Total
shares) shares premium reserves reserve earnings of parent interests equity
At 1 April
2018 356,308,697 52,378 125,567,473 6,650,305 (5,456,310) 11,461,826 138,275,672 854,752 139,130,424
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
Additions on
consolidation
of new
subsidiary (2,680) (2,680) (466) (3,146)
Dividends
(Note
21) 31,601,503 4,646 3,558,442 - - (3,563,088) - - -
Transaction
with owners 31,601,503 4,646 3,558,442 - - (3,565,768) (2,680) (466) (3,146)
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
Profit for
the year - - - - - 14,020,364 14,020,364 27,512 14,047,876
Other
comprehensive
income - - - - 1,207,292 - 1,207,292 961 1,208,253
Total
comprehensive
income - - - - 1,207,292 14,020,364 15,227,656 28,473 15,256,129
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
At 31 March
2019 387,910,200 57,024 129,125,915 6,650,305 (4,249,018) 21,916,422 153,500,648 882,759 154,383,407
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
At 1 April
2019 387,910,200 57,024 129,125,915 6,650,305 (4,249,018) 21,916,422 153,500,648 882,759 154,383,407
Employee Share
based payment
LTIP (Note
22) 835,822 - 835,822 - 835,822
Dividends
(Note
21) 12,823,311 1,885 2,325,567 - - (2,327,452) - - -
Transaction
with owners 12,823,311 1,885 2,325,567 835,822 - (2,327,452) 835,822 - 835,822
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
Profit for
the year - - - - - 8,229,504 8,229,504 (192,402) 8,037,101
Other
comprehensive
income - - - - (4,560,096) - (4,560,096) (192,402) (4,752,497)
Total
comprehensive
income - - - - (4,560,096) 8,229,503 3,669,408 (384,804) 3,284,604
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
At 31 March
2020 400,733,511 58,909 131,451,482 7,486,127 (8,809,114) 27,818,474 158,005,878 497,955 158,503,833
--------------- ------------ --------- ------------ ---------- ------------ ------------ ------------- ---------------- ------------
During the year, the Company paid a scrip dividend of 12,823,311 shares (2019:31,601,503 shares)
The notes are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
For the Year ended 31 March 2020
(All amount in GBP, unless otherwise stated)
Year ended Year ended
Notes 31 March 31 March
2020 2019
--------------------------------------------------- ------ ------------- -------------
Cash flows from operating activities
Profit before income tax including discontinued
operations 11,365,000 15,867,263
Adjustments for:
Loss from discontinued operations, net 7 3,139,501 989,493
Unrealised foreign exchange loss / (gain) 9(d) 1,568,333 (416,338)
Financial costs 11 9,926,804 14,586,917
Financial income 12 (1,962,692) (2,207,480)
Share based compensation costs 22 835,822 -
Depreciation and amortisation 6,293,034 6,064,374
Expected credit loss on Trade receivables 29 17,046,480 790,437
Changes in working capital
Trade and other receivables 4,406,823 (16,021,881)
Inventories (4,699,650) 2,564,914
Other assets 1,945,750 4,752,087
Trade and other payables (18,245,141) 2,384,828
Other liabilities (217,194) (669,762)
Cash generated from continuing operations 31,402,869 28,684,851
Taxes paid (767,865) (584,390)
------------- -------------
Cash provided by operating activities
of continuing operations 30,635,004 28,100,461
Cash provided by (used for) operating
activities of discontinued operations (2,062,318) (8,256,479)
-------------
Net cash provided by operating activities 28,572,687 19,843,983
------------- -------------
Cash flows from investing activities
Purchase of property, plant and equipment
(including capital advances) (573,668) (1,515,742)
Interest received 1,962,692 2,207,480
Movement in restricted cash 2,240,335 (1,737,255)
Sale/(purchase) of investments (725,418) 785,222
Cash from / (used in) investing activities
of continuing operations 2,903,941 (260,295)
Cash from / (used in) investing activities
of discontinued operations 426,425 (4,346,681)
-------------
Net cash from / (used in) investing activities 3,330,366 (4,606,976)
------------- -------------
Cash flows from financing activities
Proceeds from borrowings (net of costs) - 7,535,858
Repayment of borrowings (21,620,516) (20,636,875)
Finance costs paid (9,927,750) (14,835,536)
------------- -------------
Cash used in financing activities of continuing
operations (31,548,266) (27,936,553)
Cash used in financing activities of discontinued
operations 689,255 12,717,446
Net cash used in financing activities (30,859,011) (15,219,107)
------------- -------------
Net Increase / (decrease) in cash and
cash equivalents from continuing operations 1,990,679 (96,387)
Net Increase / (decrease) in cash and
cash equivalents from discontinued operations (946,638) 114,286
------------- -------------
Net increase in cash and cash equivalents 1,044,042 17,899
Cash and cash equivalents at the beginning
of the year 2,118,960 2,185,570
Cash and cash equivalents - solar business 24,545 231,953
Exchange differences on cash and cash
equivalents 19,330 29,769
Cash and cash equivalents of the discontinued
operations 231,953 (346,231)
Cash and cash equivalents at the end of
the year 3,438,830 2,118,960
------------- -------------
Consolidated statement of cash flows
For the Year ended 31 March 2020 (continued)
(All amount in GBP, unless otherwise stated)
Disclosure of Changes in financing
liabilities:
Analysis of changes in Net 1 April Cash flows Forex rate 31 March
debt 2019 impact 2020
Working Capital loan 10,433,893 (3,317,490) (202,281) 6,914,122
Secured loan due within one
year 18,435,829 (1,087,278) (516,444) 16,832,107
Borrowings grouped under Current
liabilities 28,869,722 (4,404,768) (718,725) 23,746,229
Secured loan due after one
year 51,495,208 (17,215,748) (1,198,004) 33,081,456
Borrowings grouped under Non-current
liabilities 51,495,208 (17,215,748) (1,198,004) 33,081,456
----------- --------------- ---------------- -----------
Analysis of changes in Net 1 April Cash flows Other Changes 31 March
debt 2018 2019
Working Capital loan 3,426,622 7,535,858 (528,587) 10,433,893
Secured loan due within one
year 20,402,793 (1,966,964) - 18,435,829
Borrowings grouped under Current
liabilities 23,829,415 5,568,894 (528,587) 28,869,722
Secured loan due after one
year 69,636,532 (18,669,911) 528,587 51,495,208
Borrowings grouped under Non-current
liabilities 69,636,532 (18,669,911) 528,587 51,495,208
----------- --------------- ---------------- -----------
Notes to the Consolidated Financial Statements
(All amounts are in GBP, unless otherwise stated)
1. Nature of operations
OPG Power Ventures Plc ('the Company' or 'OPGPV'), and its subsidiaries (collectively referred to as 'the Group') are primarily engaged in the development, owning, operation and maintenance of private sector power projects in India. The electricity generated from the Group's plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers and other users under the 'open access' provisions mandated by the Government of India.
2. Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretations as adopted by the European Union (EU) and the provisions of the Isle of Man, Companies Act 2006 applicable to companies reporting under IFRS.
3. General information
OPG Power Ventures Plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also the principal place of business, is 55 Athol street, Douglas, Isle of Man IM1 1LA. The Company's equity shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.
The Consolidated Financial statements for the year ended 31 March 2020 were approved and authorised for issue by the Board of Directors on 22 October 2020.
4. Recent accounting pronouncements
a. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements.
Amendments to IAS 1 and IAS 8, "Definition of Material," published in October 2018. An entity shall apply those amendments prospectively for annual periods beginning on or after 1 January 2020.
Amendments to IFRS 3, "Definition of a business," published in October 2018. Acquisitions that occur on or after first annual reporting period beginning on or after 1 January 2020. Early application is permitted.
Amendments to IFRS 9, IAS 39 and IFRS 7, "Interest rate benchmark reform," published in September 2019. An entity shall apply those amendments prospectively for annual periods beginning on or after 1 January 2020.
Currently, these adjustments are not expected to have a material impact on the consolidated financial statements of Group.
b. Changes in accounting Standards
i) IFRS 16 'Leases'
Effective April 1, 2019, the Group applied the accounting standard IFRS 16 "Leases" for the first time. IFRS 16 "Leases" replaces IAS 17 "Leases" and the corresponding interpretations. IFRS 16 introduces a uniform lessee accounting model that requires lessees to recognize all leases in the consolidated balance sheet. This model mandates that right-of-use assets be recognized for identified assets and lease liabilities recognized for entered payment obligations. In accordance with IFRS 16, lease liabilities to be recognized for leases with the Group as a lessee are to be measured at the present value of the future lease payments. In accordance with IFRS 16, right-of-use assets are recognized within property, plant and equipment under the same line item that would have been used if the underlying asset had been purchased. In contrast to the previous approach of fully recognizing expenses from operating leases in the respective functional costs, interest expenses from the unwinding of the discount on lease liabilities will in future be recognized in the financial result. Currently there are no material leases and rentals are charged to the income statement. The new lease accounting regulations have no material impact on the consolidated financial statement of the Group.
5. Summary of significant accounting policies
a) Basis of preparation
The consolidated financial statements of the Group have been prepared on a historical cost basis, except for financial assets and liabilities at fair value through profit or loss and financial assets measured at FVPL.
The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements and have been presented in Great Britain Pounds ('LIR'), the functional and presentation currency of the Company.
During FY2019, the Company obtained a right to exercise an option to buy additional 30% equity interest in solar companies. This right, in combination with other rights, provided substantive potential voting rights and investments in solar companies were re-classified from associates to subsidiaries. During FY2019, results of operations of associates Avanti Solar Energy Private Limited, Mayfair Renewable Energy Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were reclassified to discontinued operations. After evaluation of all options, the Company decided that the most efficient way to maximise shareholders' value from solar operations is to dispose solar companies and it initiated process of disposition of solar companies which met all conditions of IFRS 5 for classification of solar business as Assets held for sale at 31 March 2020 (Note 7(b)).
Going concern
As at 31 March 2020 the Group had GBP3.4m in cash and net current assets of GBP4.4m. The directors and management have prepared a cash flow forecast to October 2021, 12 months from the date this report has been approved.
The Group experiences sensitivity in its cash flow forecasts due to the exposure to potential increase in USD denominated coal prices and a decrease in the value of the Indian Rupee. The Directors and management are confident that the Group will be trading in line with its forecast and that any exposure to a fluctuation in coal prices or the exchange rate INR/USD has been taken into consideration and therefore prepared the financial statements on a going concern basis.
COVID-19 virus, a global pandemic has affected the world economy leading to significant decline and volatility in financial markets and decline in economic activities. The Group has considered the possible effects that may result from the pandemic on the carrying amounts of receivables and other financial assets and carried out a Reverse Stress Test (RST). In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information. The Group has performed sensitivity analysis on the assumptions used for business projections and based on current estimates expects the carrying amount of these assets will be recovered and no material impact on the financial results inter-alia including the carrying value of various current and non-current assets are expected to arise for the year ended 31 March 2020. The Group will continue to closely monitor any variation due to the changes in situation and these changes will be taken into consideration, if necessary, as and when they crystalise. However, electricity being an essential commodity the impact on industry has been comparatively lower. The operating assets of the
Group primarily are located in India. The Government of India with Reserve Bank of India (RBI) have announced various regulatory measures to help the industry. Subsequent to year end, RBI announced various regulatory measures (RBI COVID-19 Regulatory package which, inter alia, provides for rescheduling of payments towards Term Loans and Working Capital facilities for principal and interest) to mitigate the burden of debt servicing brought by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. The Group has opted for such measures for deferment of payment of principal and interest on term loans and also interest on working capital loans. Please refer to events after year end detailed below that have substantially eased the cash flow burden on account of the Group having repaid the principal term loan obligation for FY 21 and FY 22 and major recoveries of overdues towards power supply from our principle customer TANGEDCO. Based on the RST analysis, we can conclude that the Group is in strong position to go through the current situation caused by COVID-19 pandemic and going concern is not an issue.
Developments after the year end
Group raised approximately GBP 21.0 million (Rs.2000 million) during June 2020 through non-convertible debentures (NCDs) issue with a three years term and coupon rate of 9.85%. NCD's proceeds was used to repay the FY21 and FY22 (i.e. to March 2022) principal term loans obligations. This will substantially release the cash flow burden for the next two financial years on account of loan repayment obligations.
Subsequent to 31 March 2020, the Group collected the full amount of receivables from its principle customer TANGEDCO of approximately GBP16.4 m.
These two developments strengthened the Group's financial position at this time of economic slowdown.
b) Basis of consolidation
The consolidated financial statements include the assets, liabilities and results of the operation of the Company and all of its subsidiaries as of 31 March 2020. All subsidiaries have a reporting date of 31 March.
A subsidiary is defined as an entity controlled by the Company. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are fully consolidated from the date of acquisition, being the date on which effective control is acquired by the Group, and continue to be consolidated until the date that such control ceases.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to non-controlling interests/ other venturer in the Group where there is no loss of control are accounted for as an equity transaction, whereby, the difference between the consideration paid to or received from and the book value of the share of the net assets is recognised in 'other reserve' within statement of changes in equity.
c) Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in associates and joint ventures is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
d) List of subsidiaries, joint ventures, and associates
Details of the Group's subsidiaries and joint ventures, which are consolidated into the Group's consolidated financial statements, are as follows:
i) Subsidiaries
% Voting Right % Economic interest
------ --- ----
Immediate Country March
Subsidiaries parent of incorporation March 2020 March 2019 2020 March 2019
---------------------- -------------- --------------------- ------------- ------------- -------- ------------
Caromia Holdings
limited ('CHL') OPGPV Cyprus 100 100 100 100
Gita Power and
Infrastructure
Private Limited,
('GPIPL') CHL India 100 100 100 100
OPG Power Generation
Private Limited
('OPGPG') GPIPL India 73.16 73.49 99.91 99.91
Samriddhi Solar
Power LLP(*) OPGPG India 73.16 73.49 99.91 99.90
Samriddhi Surya
Vidyut Private
Limited OPGPG India 73.16 73.49 99.91 99.90
OPG Surya Vidyut
LLP(*) OPGPG India 73.16 73.49 99.91 99.90
Powergen Resources
Pte Ltd OPGPV Singapore 98.66 98.67 100.00 100.00
Avanti Solar Energy
Private Limited(**) OPGPG India 31 31% 31 31%
Mayfair Renewable
Energy Private
Limited(**) OPGPG India 31 31% 31 31%
Avanti Renewable
Energy Private
Limited(**) OPGPG India 31 31% 31 31%
Brics Renewable
Energy Private
Limited(**) OPGPG India 31 31% 31 31%
(*)During FY20 the companies were converted into LLP.
(**)During FY19, the Group obtained a right 'to exercise an option to buy additional equity interest in solar companies. This right, in combination with other rights, provided substantive potential voting rights and investments in solar companies were re-classified from associates to subsidiaries.
ii) Financial assets measured at FVPL (Assets
Held for sale) - Joint ventures (Note 7(a))
Joint ventures Venturer Country of incorporation % Voting right % Economic interest
-------------------- ---------- --------------------------
March 2019 March March March
2018 2019 2018
------------------ ---------- -------------------------- ----------- ------ ---------- ----------
Padma Shipping OPGPV /
Limited ("PSL") OPGPG Hong Kong 50 50 50 50
e) Foreign currency translation
The functional currency of the Company is the Great Britain Pound Sterling (GBP). The Cyprus entity is an extension of the parent and pass through investment entity. Accordingly, the functional currency of the subsidiary in Cyprus is the Great Britain Pound Sterling. The functional currency of the Company's subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees (' ' or 'INR'). The presentation currency of the Group is the Great Britain Pound (GBP) as submitted to the AIM counter of the London Stock Exchange where the shares of the Company are listed.
At the reporting date the assets and liabilities of the Group are translated into the presentation currency at the rate of exchange prevailing at the reporting date and the income and expense for each statement of profit or loss are translated at the average exchange rate (unless this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expense are translated at the rate on the date of the transactions). Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity.
Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of financial position date are translated into functional currency at the foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in finance income or costs within the profit or loss.
INR exchange rates used to translate the INR financial information into the presentation currency of Great Britain Pound (GBP) are the closing rate as at 31 March 2020: 93.07 (2019: 90.28) and the average rate for the year ended 31 March 2020: 89.97 (2019: 91.60).
f) Revenue recognition
In accordance with IFRS 15 - Revenue from contracts with customers, the group recognises revenue to the extent that it reflects the expected consideration for goods or services provided to the customer under contract, over the performance obligations they are being provided. For each separable performance obligation identified, the Group determines whether it is satisfied at a "point in time" or "over time" based upon an evaluation of the receipt and consumption of benefits, control of assets and enforceable payment rights associated with that obligation. If the criteria required for "over time" recognition are not met, the performance obligation is deemed to be satisfied at a "point in time". Revenue principally arises as a result of the Group's activities in electricity generation and distribution. Supply of power and billing satisfies performance obligations. The supply of power is invoiced in arrears on a monthly basis and generally the payment terms within the Group are 30 days.
Sale of electricity
Revenue from the sale of electricity is recognised on the basis of billing cycle under the contractual arrangement with the customers and reflects the value of units of power supplied and the applicable customer tariff after deductions or discounts. Revenue is earned at a point in time of joint meter reading by both buyer and seller for each billing month.
Interest and dividend
Revenue from interest is recognised as interest accrued (using the effective interest rate method). Revenue from dividends is recognised when the right to receive the payment is established.
g) Operating expenses
Operating expenses are recognised in the statement of profit or loss upon utilisation of the service or as incurred.
h) Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. Deferred tax assets and liabilities are offset only when the Group has a right and the intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.
i) Financial assets
IFRS 9 Financial Instruments contains regulations on measurement categories for financial assets and financial liabilities. It also contains regulations on impairments, which are based on expected losses.
Financial assets are classified as financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (FVOCI) and financial assets measured at fair value through profit and loss (FVPL) based on the business model and the characteristics of the cash flows. If a financial asset is held for the purpose of collecting contractual cash flows and the cash flows of the financial asset represent exclusively interest and principal payments, then the financial asset is measured at amortized cost. A financial asset is measured at fair value through other comprehensive income (FVOCI) if it is used both to collect contractual cash flows and for sales purposes and the cash flows of the financial asset consist exclusively of interest and principal payments. Unrealized gains and losses from financial assets measured at fair value through other comprehensive income (FVOCI), net of related deferred taxes, are reported as a component of equity (other comprehensive income) until realized. Realized gains and losses are determined by analyzing each transaction individually. Debt instruments that do not exclusively serve to collect contractual cash flows or to both generate contractual cash flows and sales revenue, or whose cash flows do not exclusively consist of interest and principal payments are measured at fair value through profit and loss (FVPL). For equity instruments that are not held for trading purposes the group has uniformly exercised the option of recognizing changes in fair value through profit or loss (FVPL). Refer to note 30 "Summary of financial assets and liabilities by category and their fair values".
Impairments of financial assets are both recognized for losses already incurred and for expected future credit defaults. The amount of the impairment loss calculated in the determination of expected credit losses is recognized on the income statement. Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
j) Financial liabilities
The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'finance costs' or 'finance income'.
k) Fair value of financial instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market prices at the close of business on the Statement of financial position date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.
l) Property, plant and equipment
Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment in value. Historical cost includes expenditure that is directly attributable to property plant & equipment such as employee cost, borrowing costs for long-term construction projects etc., if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the profit or loss as incurred.
Land is not depreciated. Depreciation on all other assets is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:
Nature of asset Useful life (years) ----------------- -------------------- Buildings 40 Power stations 40 Other plant and equipment 3-10 Vehicles 5-11 ----------------- --------------------
Assets in the course of construction are stated at cost and not depreciated until commissioned.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.
The assets residual values, useful lives and methods of depreciation of the assets are reviewed at each financial year end, and adjusted prospectively if appropriate.
m) Intangible assets
Acquired software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific software.
Subsequent measurement
All intangible assets, including software are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. The useful life of software is estimated as 4 years.
n) Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
Leases of low value assets; and
-- Leases with a duration of 12 months or less.
IFRS 16 was adopted effective from 1 April 2019 without restatement of comparative figures.
The following policies apply subsequent to the date of initial application, 1 April 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour of the group if it is reasonable certain to assess that option;
-- any penalties payable for terminating the lease, if the term of the lease has been estimated in the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease
incentives received, and increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations)
o) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.
Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as borrowing costs and are charged to profit or loss.
All other borrowing costs including transaction costs are recognized in the statement of profit or loss in the period in which they are incurred, the amount being determined using the effective interest rate method.
p) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-generating unit's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss.
q) Non-current assets Held for Sale and Discontinued Operations
Non-current assets and any corresponding liabilities held for sale and any directly attributable liabilities are recognized separately from other assets and liabilities in the balance sheet in the line items "Assets held for sale" and "Liabilities associated with assets held for sale" if they can be disposed of in their current condition and if there is sufficient probability of their disposal actually taking place. Discontinued operations are components of an entity that are either held for sale or have already been sold and can be clearly distinguished from other corporate operations, both operationally and for financial reporting purposes. Additionally, the component classified as a discontinued operation must represent a major business line or a specific geographic business segment of the Group. Non-current assets that are held for sale either individually or collectively as part of a disposal group, or that belong to a discontinued operation, are no longer depreciated. They are instead accounted for at the lower of the carrying amount and the fair value less any remaining costs to sell. If this value is less than the carrying amount, an impairment loss is recognized. The income and losses resulting from the measurement of components held for sale as well as the gains and losses arising from the disposal of discontinued operations, are reported separately on the face of the income statement under income/loss from discontinued operations, net, as is the income from the ordinary operating activities of these divisions. Prior-year income statement figures are adjusted accordingly. However, there is no reclassification of prior-year balance sheet line items attributable to discontinued operations.
r) Cash and cash equivalents
Cash and cash equivalents in the Statement of financial position includes cash in hand and at bank and short-term deposits with original maturity period of 3 months or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash in hand and at bank and short-term deposits. Restricted cash represents deposits which are subject to a fixed charge and held as security for specific borrowings and are not included in cash and cash equivalents.
s) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.
t) Earnings per share
The earnings considered in ascertaining the Group's earnings per share (EPS) comprise the net profit for the year attributable to ordinary equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares outstanding during the year. For the purpose of calculating diluted earnings per share the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.
u) Other provisions and contingent liabilities
Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as described above and the amount recognised on the acquisition date, less any amortisation.
v) Share based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans feature any options for a cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to 'Other Reserves'.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.
w) Employee benefits
Gratuity
In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment.
Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Statement of financial position date using the projected unit credit method.
The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively in accordance with IAS 19, Employee benefits. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of comprehensive income in the period in which they arise.
x) Business combinations
Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.
y) Segment Reporting
The Group is primarily involved in business of power generation. Considering the nature of Group's business, as well as based on reviews by the chief operating decision maker to make decisions about resource allocation and performance measurement, there are only two reportable segments in accordance with the requirements of IFRS 8.
6. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a number of these policies requires the Group to use a variety of estimation techniques and apply judgment to best reflect the substance of underlying transactions.
The Group has determined that a number of its accounting policies can be considered significant, in terms of the management judgment that has been required to determine the various assumptions underpinning their application in the consolidated financial statements presented which, under different conditions, could lead to material differences in these statements. The actual results may differ from the judgments, estimates and assumptions made by the management and will seldom equal the estimated results.
a. Judgements
The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the financial statements.
Assessing control of subsidiaries, associates, joint ventures
During FY19, the Company obtained a right to exercise an option to buy additional 30% equity interest in the solar companies. This right, in combination with other rights, provided substantive potential voting rights and the investments in the solar companies were re-classified from associates to subsidiaries. Subsequently, the results of operations of Avanti Solar Energy Private Limited, Mayfair Renewable Energy Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were reclassified to discontinued operations.
Non-current assets held for sale and discontinued operations
The Group exercises judgement in whether assets are held for sale. After evaluation of all options, the Company decided that the most efficient way to maximise shareholders' value from solar operations is to dispose of the solar companies and it initiated the process of disposition of the solar companies. Under IFRS 5, such a transaction meets the 'Asset held for sale' when the transaction is considered sufficiently probable and other relevant criteria are met. Management consider that all the conditions under IFRS 5 for classification of the solar business as held for sale have been met as at 31 March 2020 and expects the interest in the solar companies to be sold within the next 12 months.
The investment in the joint venture Padma Shipping Limited and associated advance has been presented as asset held for sale following the process of sale of the second vessel as mentioned in note 7(a).
Recoverability of deferred tax assets:
The recognition of deferred tax assets requires assessment of future taxable profit (see note 5(h)).
b. Estimates and uncertainties
The key assumptions concerning the future and other key sources of estimation uncertainty at the Statement of financial position date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:
i. Estimation of fair value of financial assets and financial liabilities: While preparing the financial statements the Group makes estimates and assumptions that affect the reported amount of financial assets and financial liabilities.
Trade Receivables
The Group ascertains the expected credit losses (ECL) for all receivables and adequate impairment provision are made. At the end of each reporting period a review of the allowance for impairment of trade receivables is performed. Trade receivables do not contain a significant financing element, and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised on initial recognition. A provision matrix is utilised to estimate the lifetime expected credit losses based on the age, status and risk of each class of receivable, which is periodically updated to include changes to both forward-looking and historical inputs.
Assets held for sale - Financial assets measured at FVPL
Valuation of Investment in joint venture Padma Shipping is based on estimates and subject to uncertainties (Note 7(a)).
Financial assets measured at FVPL
Management applies valuation techniques to determine the fair value of financial assets measured at FVPL where active market quotes are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market participants would use in pricing the asset. Where such data is not observable, management uses its best estimate. Estimated fair values of the asset may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
Other financial liabilities
Borrowings held by the Group are measured at amortised cost (Note 5(j) and note 29).
ii. Impairment tests: In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based on expected future cash flows and use an interest rate for discounting them. Estimation uncertainty relates to assumptions about future operating results including fuel prices, foreign currency exchange rates etc. and the determination of a suitable discount rate;
iii. Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.
7. Non-current assets held for sale and discontinued operation
Non-current assets held for sale and discontinued operations consists
of:
Assets held for Liabilities classified Loss from discontinued
sale as held for sale operations
--------------------------
At 31 At 31 At 31
March March At 31 March March For For FY
2020 2019 2020 2019 FY 20 19
----------- ------------ ----------- ------------ ------------
Impairment of investments
i in joint venture - 918,432 - - (918,432) (1,010,200)
--------------------------- ----------- ----------- ------------ ----------- ------------ ------------
Solar subsidiaries
ii (7(b)) 46,356,680 49,579,232 32,866,783 35,267,786 (293,942) 20,708
--------------------------- ----------- ----------- ------------ ----------- ------------ ------------
iii Impairment of deposits
pledged for lenders
of BVP Note7(c ) - - - - (933,901) -
--------------------------- ----------- ------------ ----------- ------------ ------------
Total 46,356,680 50,497,664 32,866,783 35,267,786 (2,146,275) (989,493)
--------------------------------- ----------- ------------ ----------- ------------ ------------
a) Investment in joint venture Padma Shipping Limited - classified as held for sale
In 2014 the Company entered into a Joint Venture agreement with Noble Chartering Ltd ("Noble"), to secure competitive long term rates for international freight for its imported coal requirements. Under the Arrangement, the company and Noble agreed to jointly purchase and operate two 64,000 MT cargo vessels through a Joint venture company Padma Shipping Ltd, Hong Kong ('Padma').
During FY18, the Joint Venture partner due to a change in their group strategy requested for the Joint Venture to be terminated and as the vessels were still under construction, OPG agreed with this proposal. During FY19 one of the vessels was sold by the shipping yard and the second vessel was sold during FY20. The Padma joint venture will be terminated and dissolved. As at 31 March 2020, the investment was therefore reclassified to assets held for sale.
OPG has invested approximately GBP3,484,178 in equity and GBP1,727,418 to date as advance and accordingly the joint venture has been reported using equity method as per the requirements of IFRS 11. During the year the Company recognised an impairment provision of GBP918,432 (2019 GBP1,000,000) resulting in impairment of entire investment of GBP5,211,596 in joint venture (note 16) on account of the impending dissolution of the JV.
b) Assets held for sale and discontinued operations of solar subsidiaries
During FY19, the results of the operations of solar subsidiaries Avanti Solar Energy Private Limited, Mayfair Renewable Energy Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were classified as Assets held for sale. After evaluation of all the options, the Company decided that the most efficient way to maximise shareholders' value from the solar operations is to dispose of the solar companies and the process of disposition of the solar companies was initiated. The process of sale could not be implemented during FY20 due to pandemic COVID-19 and expectation of comparatively better valuation for sale. However the Management expects the interest in the solar companies to be sold within the next 12 months and continues to locate a buyer.
Non-current Assets held-for-sale and discontinued
operations
(a) Assets of disposal group classified As at 31 March As at 31 March
as held-for-sale 2020 2019
Property, plant and equipment 42,098,498 46,442,294
Trade and other receivables 3,489,633 578,721
Other short-term assets 256,209 499,527
Restricted cash 487,795 1,712,450
Cash and cash equivalents 24,545 346,240
Investment in Joint venture classified as
held for sale - 918,432
--------------- ---------------
Total 46,356,680 50,497,664
--------------------------------------------------- --------------- ---------------
(b) Liabilities of disposal group classified As at 31 March As at 31 March
as held-for-sale 2020 2019
Non Current liabilities
Borrowings 28,262,288 17,194,745
Trade and other payables - 7,710,956
Deferrred tax liability 1,014,031 1,666,495
Current liabilities
Trade and other payables 901,474 3,958,192
Other liabilities 2,688,990 4,737,398
---------------------------------------------- ---------------------- ----------------------
Total 32,866,783 35,267,786
---------------------------------------------- ---------------------- ----------------------
(c) Analysis of the results of discontinued For FY 20 For FY 19
operations is as follows:
Revenue 5,884,401 5,007,509
Operating profit before impairments 2,160,974 4,009,485
Finance income 92,096 311,744
Finance cost (3,540,239) (2,294,669)
Current Tax - (363,372)
Deferred tax 993,226 (1,642,480)
--------------------------------------------- ------------ ------------
Profit/(Loss) from Solar operations (293,942) 20,708
--------------------------------------------- ------------ ------------
c) Loss from discontinued operations of BVP
As reported in the FY18 financial statements, the Group had pledged deposits with lenders of BVP for overdraft facility availed by BVP. During the year the lenders of BVP have appropriated the entire deposits towards the overdraft loan availed by BVP. The Group has already impaired GBP12,627,381 during FY18 and the balance deposits of GBP933,901 has been impaired during the year.
8 Segment Reporting
The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8 - Operating segments. Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of Directors being the chief operating decision maker evaluate the Group's performance and allocates resources based on an analysis of various performance indicators at operating segment level. Accordingly, there are two operating segments, thermal power and solar power following the reclassification of the interest in the solar companies as subsidiaries as detailed in note 7(b). The solar power business was classified as held for sale subsequently. There are no geographical segments as all revenues arise from India. All the non-current assets are located in India.
Revenue on account of sale of power to one customer exceeding 10% of total sales revenue amounts to GBP27,152,241 (2019: GBP24,117,088).
Segmental information disclosure
Continuing operations Discontinued operations
Thermal Solar
Segment Revenue FY20 FY19 FY20 FY19
Sales 154,040,283 140,632,328 5,884,401 5,007,509
------------- ------------- ------------ ------------
Total 154,040,283 140,632,328 5,884,401 5,007,509
------------- ------------- ------------ ------------
Depreciation, impairment (6,293,034) (6,064,374) (3,516,527) -
Profit / (loss) from operation
Finance Cost 24,036,945 29,236,193 2,160,974 4,009,485
Tax expenses 1,962,692 2,207,480 92,096 311,744
------------- ------------- ------------ ------------
Profit / (loss) for the
year (11,495,136) (14,586,917) (3,540,239) (2,294,669)
------------- ------------- ------------ ------------
Loss from discontinued operations relating to shipping JV and past
subsidiary BVP aggregating to GBP1,887,629 not included above.
Assets 294,328,018 304,743,440 49,579,232 -
Liabilities 155,174,489 165,613,016 35,267,786 -
9 Costs of inventories and employee benefit expenses included in the consolidated statements of comprehensive income
a) Cost of fuel
31 March 2020 31 March 2019
---------------------------------------- --------------- ---------------
Included in cost of revenue:
Cost of fuel consumed 83,133,530 88,754,095
Other direct costs 6,926,722 2,999,668
---------------
Total 90,060,252 91,753,763
--------------------------------------------- --------------- ---------------
b) Employee benefit expenses forming part of general and administrative
expenses are as follows:
31 March 2020 31 March 2019
---------------------------------------- --------------- ---------------
Salaries and wages 2,756,438 3,302,162
Employee benefit costs * 760,914 251,520
Long Term Incentive Plan (Note 22) 835,822 -
---------------
Total 4,353,174 3,553,682
--------------------------------------------- --------------- ---------------
* includes GBP21,860 (2019: NIL) being expenses towards gratuity which is a defined benefit plan (Note 5(w))
c) Auditor's remuneration for audit services amounting to GBP65,000
(2019: GBP80,000) is included in general and administrative expenses.
d) Foreign exchange movements (realised and unrealised) included
in the Finance costs is as follows:
31 March 2020 31 March 2019
------------------------------------------- --------------- --------------
Foreign exchange realised - (gain)/loss (420,842) 3,543,163
Foreign exchange unrealised- (gain)
/ loss 1,568,333 (416,338)
--------------- --------------
Total 1,147,491 3,126,825
------------------------------------------------ --------------- --------------
10 Other income and expenses
Other income
31 March 20209 31 March 2019
--------------------------------------------- --------------- --------------
Sale of coal 462,718 887,815
Sale of fly ash 26,611 48,910
Power trading commission and other services 161,053 1,217,369
Others 17,655 491,238
--------------
Total 668,037 2,645,332
--------------------------------------------- --------------- --------------
11 Finance costs
Finance costs are comprised of:
---------------------------------------- --------------- ------------
31 March
31 March 2020 2019
---------------------------------------- --------------- ------------
Interest expenses on borrowings 9,289,625 10,210,464
Net foreign exchange loss (Note 9) 1,147,491 3,126,825
Other finance costs 1,058,020 1,249,628
--------------- ------------
Total 11,495,136 14,586,917
---------------------------------------- --------------- ------------
Other finance costs include charges and cost related to LC's for
import of coal and other charges levied by banks on transactions
12 Finance income
Finance income is comprised of:
----------------------------------------------- -------------- --------------
31 March 2020 31 March 2019
----------------------------------------------- -------------- --------------
Interest income on bank deposits and advances 1,943,132 2,192,555
Profit on disposal of financial instruments* 19,560 14,925
-------------- --------------
Total 1,962,692 2,207,480
----------------------------------------------- -------------- --------------
*Financial instruments represent the mutual
funds held during the year.
13 Tax expense
Tax Reconciliation
Reconciliation between tax expense and the product of accounting profit multiplied by India's domestic tax rate for the years ended 31 March 2019 and 2018 is as follows:
31 March 2020 31 March 2019
----------------------------------------------- -------------- --------------
Accounting profit / (loss) before taxes 14,504,501 16,856,756
Enacted tax rates 34.94% 34.94%
Tax expense / (benefit) on profit / (loss)
at enacted tax rate 5,068,453 5,890,425
Exempt Income due to tax holiday (22,896) (685,895)
Foreign tax rate differential (327,343) 303,096
Unused tax losses brought forward and carried
forward (993,226) (1,216,052)
Non-taxable items - (275,769)
MAT credit entitlement (397,088) (190,567)
Actual tax for the period 3,327,899 3,825,239
----------------------------------------------- -------------- --------------
31 March 2020 31 March 2019
------------------------------------------------ ----------------- --------------
Current tax 788,430 1,281,584
Deferred tax 3,532,694 537,803
Total tax expenses on income from continued
operations 4,321,124 1,819,387
Add: tax on income from discontinuing operations (993,226) 2,005,852
----------- --------------
Tax reported in the statement of comprehensive
income 3,327,899 3,825,239
------------------------------------------------------ ----------- --------------
The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company's tax liability is zero. Additionally, Isle of Man does not levy tax on capital gains. However, considering that the group's operations are primarily based in India, the effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the profits of the Group's India operations are exempt from Indian income taxes being profits attributable to generation of power in India. Under the tax holiday the taxpayer can utilize an exemption from income taxes for a period of any ten consecutive years out of a total of fifteen consecutive years from the date of commencement of the operations. However, the entities in India are still liable for Minimum Alternate Tax (MAT) which is calculated on the book profits of the respective entities currently at a rate of 17.47% (31 March 2019: 21.55%).
The Group has carried forward credit in respect of MAT tax liability paid to the extent it is probable that future taxable profit will be available against which such tax credit can be utilised.
Deferred income tax for the Group at 31 March 2020 and 2019 relates to the following:
31 March 2020 31 March 2019
----------------------------------------------- -------------- --------------
Deferred income tax assets
Unused tax losses brought forward and carried
forward 1,216,052 1,216,052
MAT credit entitlement 11,962,515 11,565,427
-------------- --------------
13,178,567 12,781,479
Deferred income tax liabilities
Property, plant and equipment 18,902,358 15,161,594
-------------- --------------
18,902,358 15,161,594
-------------- --------------
Deferred income tax liabilities, net 5,723,791 2,380,115
----------------------------------------------- -------------- --------------
Movement in temporary differences during the year
Particulars Classified
as (Asset)
Deferred / Liability As at
As at 01 tax Asset/(Liability) held for Translation 31 Mar
April 2019 for the year sale adjustment 2020
---------------------------------- ------------- ----------------------- ------------- ------------ -------------
Property, plant and equipment (15,161,594) (2,936,557) (993,226) 189,018 (18,902,358)
Unused tax losses brought
forward and carried forward 1,216,052 - 1,216,052
MAT credit entitlement 11,565,427 397,088 - - 11,962,515
-------------
Deferred income tax (liabilities)
/ assets, net (2,380,115) (2,539,468) (993,226) 189,018 (5,723,791)
---------------------------------- ------------- ----------------------- ------------- ------------ -------------
Particulars Classified
as (Asset)
As at Deferred / (Liability) As at
01 April tax Asset/(Liability) held for Translation 31 Mar
2018 for the year sale adjustment 2019
------------- ----------------------- --------------- ------------ -------------
Property, plant and equipment (12,853,799) (4,754,829) 2,447,034 - (15,161,594)
Unused tax losses brought
forward and carried forward - 2,020,606 (804,554) - 1,216,052
MAT credit entitlement 11,396,590 190,567 - (21,730) 11,565,427
--------------------------------
Deferred income tax
(liabilities)
/ assets, net (1,457,209) (2,543,656) 1,642,480 (21,730) (2,380,115)
-------------------------------- ------------- ----------------------- --------------- ------------ -------------
In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
There are no unrecognised deferred tax assets and liabilities. As at 31 March 2020 and 2019, there was no recognised deferred tax liability for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, as the Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.
14 Intangible assets Acquired software
licences
Cost
At 31 March 2018 847,648
Additions -
Exchange adjustments 4,976
At 31 March 2019 852,624
At 31 March 2019 852,624
Additions -
Exchange adjustments (25,559)
At 31 March 2020 827,065
--------------------
Accumulated depreciation and impairment
At 31 March 2018 783,478
Charge for the year 40,354
Exchange adjustments 5,190
At 31 March 2019 829,021
At 31 March 2019 829,021
Charge for the year 14,327
Exchange adjustments (25,329)
At 31 March 2020 818,020
--------------------
Net book value
At 31 March 2020 9,045
At 31 March 2019 23,603
15 Property, plant and equipment
The property, plant and equipment comprises of:
Other Asset
Land Power plant under
& Buildings stations & equipment Vehicles Solar assets construction Total
------------- ------------- ------------- ---------- ------------- ------------- -------------
Cost
At 1 April 2018 4,744,093 221,066,874 614,925 2,394,639 - 4,530,760 233,351,291
Additions 236,830 316,648 1,154,749 8,751 - 18,803 1,735,781
Additions -
Solar
assets (note
7(b)) 46,635,849 - 46,635,849
Deletions - (11,054) - - - - (11,054)
Solar assets
classified as
Asset Held for
Sale (note
7(b)) - - - - (46,635,849) - (46,635,849)
Transfer on
capitalisation - 290,658 - - - (290,658) -
Exchange
adjustments 26,978 1,297,928 3,595 14,023 - 26,959 1,369,483
------------- ------------- ------------- ---------- ------------- ------------- -------------
At 31 March
2019 5,007,901 222,961,054 1,773,269 2,417,413 - 4,285,864 236,445,501
------------- ------------- ------------- ---------- ------------- ------------- -------------
At 1st April
2019 5,007,901 222,961,054 1,773,269 2,417,413 - 4,285,864 236,445,501
Additions - 294,954 165,831 10,958 - 82,815 554,559
Transfers on
capitalisation 3,903,256 56,168 - - - (3,959,424) -
Exchange adjustments (145,667) (6,689,809) (52,848) (72,290) - (128,479) (7,089,093)
At 31 March 2020 8,765,490 216,622,367 1,886,252 2,356,081 - 280,776 229,910,967
---------- ------------ ---------- ---------- ------------ ------------
Accumulated depreciation and
impairment
At 1 April 2018 32,174 24,456,188 526,100 1,065,694 - - 26,080,156
Charge for the
year * 12,363 5,494,384 103,316 413,957 - - 6,024,020
Additions - Solar
assets (note
7(b)) - - - - 4,417 - 4,417
Exchange adjustments 493 221,076 4,595 12,270 - - 238,434
Solar assets
classified as
Asset Held for
Sale (note 7(b)) - - - - (4,417) - (4,417)
At 31 March 2019 45,030 30,171,648 634,011 1,491,921 - - 32,342,610
At 1 April 2019 45,030 30,171,648 634,011 1,491,921 - - 32,342,610
Charge for the
year * 12,981 5,603,791 272,110 389,825 - 6,278,707
Exchange adjustments (2,410) (1,091,777) (28,050) (57,509) - - (1,179,746)
At 31 March 2020 55,601 34,683,662 878,072 1,824,237 - - 37,441,572
-------- ------------ --------- ---------- ------------
Net book value
At 31 March 2020 8,709,889 181,938,705 1,008,180 531,845 - 280,776 192,469,395
At 31 March 2019 4,962,871 192,789,406 1,139,258 925,492 - 4,285,864 204,102,891
---------- ------------ ---------- -------- ---------- ------------
The net book value of land and buildings
block comprises of:
31 March 2020 31 March 2019
--------------------------------------------------- -------------- --------------
Freehold land 8,134,867 4,514,642
Buildings 405,387 448,229
--------------
8,540,254 4,962,871
------------------------------------------------ -------------- --------------
Property, plant and equipment with a carrying amount of GBP187,757,094 (2019: GBP197,184,156) is subject to security restrictions (refer note 23).
16 Investments accounted for using the equity method
The carrying amount of investments accounted for using the equity method is as follows:
31 March
2020 31 March 2019
----------------------------------------------- ------------ --------------
Investments in joint venture 3,448,882 3,448,882
Impairment provision for investments in joint
venture (Note 7(a)) (3,448,882) (3,247,668)
Balance value of Investments in joint venture
classified as Assets held for sale - (201,214)
Investments accounted for using the equity - -
method
----------------------------------------------- ------------ --------------
The Group's share of loss from equity accounted investments is as follows:
31 March 2020 31 March 2019
--------------------------- --------------- --------------
Investment in joint
venture - (34,638)
Investments in associates - (658)
--------------
- (35,296)
------------------------------------------- --------------
a) Investment in joint venture (Note 5(d) and Note 7(a))
The investment in Padma Shipping Limited ("PSL") is accounted for using the equity method in accordance with IAS 28. The financial statements of PSL are as of 31 December 2019 which is the financial year followed by PSL. As no additional information was available as such the 31st December 2019 balances have been used below. At the end of the year the investment in PSL net of impairment provision is classified as Asset held for sale. Summarised financial information for Padma Shipping Limited ("PSL") is set out below:
31 March
2020 31 March 2019
------------------------- ----------- --------------
Non-current assets 11,652,330 11,652,330
Current assets (a) 29,970 29,970
Total assets 11,682,300 11,682,300
-------------------------- ----------- --------------
Current liabilities (b) 11,682,300 4,784,535
Total liabilities 11,682,300 4,784,535
-------------------------- ----------- --------------
Net assets - 6,897,765
-------------------------- ----------- --------------
a) Includes cash and cash equivalents
b) Includes financial liabilities
31 March 2020 31 March 2019
------------------------------------------ -------------- --------------
Total net assets
of PSL - 6,897,765
Proportion of ownership interests held
by the Group 50% 50%
Group's share of the investment
in PSL - 3,448,882
----------------------------------------- -------------- --------------
17 Other Assets
31 March 31 March 2019
2020
---------------------------------------------------------- ---------- --------------
A. Short-term
Capital advances 114,084 280,494
Equity instruments measured at fair value
through P&L 741,425 40,453
Advances and other receivables 6,587,261 6,008,407
Total 7,442,440 6,329,354
---------- --------------
B. Long-term
Lease deposits 492,973 502,869
Other advances 16,655 15,684
-----------
Total 509,628 518,553
----------------------------------------------- ----------- -----------
Financial instruments measured at fair value through P&L are comprised of:
Fair value of retained investment in former subsidiary BVP GBP40,453 (Note 7(c)). Fair Valuation of retained investments in BVP is on the basis of the last transaction.
The fair value of the mutual fund instruments of GBP700,972 are determined by reference to published data.
18 Trade and other receivables
31 March 2020 31 March 2019
--------------------- -------------- --------------
Current
Trade receivables 26,901,986 49,079,582
Other receivables - 118,523
--------------
26,901,986 49,198,105
-------------------- -------------- --------------
The Group's trade receivables are classified at amortised cost unless stated otherwise and are measured after allowances for future expected credit losses, see "Credit risk analysis" in note 29 "Financial risk management objectives and policies" for more information on credit risk. The carrying amounts of trade and other receivables, which are measured at amortised cost, approximate their fair value and are predominantly non-interest bearing.
19 Inventories
31 March 2020 31 March 2019
----------------------------- --------------------------- --------------
Coal and fuel 10,505,138 6,038,267
Stores and spares 974,961 1,113,099
--------------
Total 11,480,099 7,151,366
----------------------------- --------------------------- --------------
The entire amount of above inventories has been pledged as security for borrowings (refer note 23)
20 Cash and cash equivalents and Restricted cash
a. Cash and short term deposits comprise of the following:
31 March 2020 31 March 2019
------------------------------- --------------------------- --------------
Cash at banks and on hand 3,438,830 2,118,960
--------------
Total 3,438,830 2,118,960
------------------------------- --------------------------- --------------
Short-term deposits are placed for varying periods, depending on the immediate cash requirements of the Group. They are recoverable on demand.
b. Restricted cash
Restricted cash represents deposits maturing between three to twelve months amounting to GBP7,497,967 (2019: GBP23,030,599) and maturing after twelve months amounting to GBP26,645 (2019: GBP517,271) which have been pledged by the Group in order to secure borrowing limits with banks. In FY19, restricted cash of GBP23,030,599 includes GBP12,627,381 pledged during the previous year in favour of lenders of BVP (Note 7(c)). In FY20, the Group has made impairment provision of GBP933,901 of securities provided to lenders of BVP.
21 Issued share capital
Share Capital
The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Group on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Group.
The Company has issued 12,823,311 (2019: 31,601,503) shares during the year with respect to scrip dividend at par value of GBP0.000147 (2019: GBP0.000147) per share amounting to GBP1,885 (2019: GBP4,646). The difference between fair value of shares issued above par value of GBP2,325,567 (2019: GBP3,558,442) with respect to scrip dividend was credited to share premium.
As at 31 March 2020, the Company has an authorised and issued share capital of 400,733,511 (2019: 387,910,200) equity shares at par value of GBP 0.000147 (2019: GBP 0.000147) per share amounting to GBP58,909 (2019: GBP57,024) in total.
Reserves
Share premium represents the amount received by the Group over and above the par value of shares issued. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
Foreign currency translation reserve is used to record the exchange differences arising from the translation of the financial statements of the foreign subsidiaries.
Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest, without change in control, other reserves also includes any costs related with share options granted and gain/losses on re-measurement of financial assets measured at fair value through other comprehensive income.
Retained earnings include all current and prior period results as disclosed in the consolidated statement of comprehensive income less dividend distribution.
22 Share based payments
The board has granted share options to directors and nominees of directors which are limited to 10 percent of the Group's share capital. Once granted, the shares must be exercised within ten years of the date of grant otherwise the options would lapse.
The vesting conditions are as follows:
-- The 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for three months.
-- The Closing share price being at least GBP1.00 for three consecutive business days.
The related expense has been amortised over the remaining estimated vesting period and an expense amounting to GBP Nil (2019: GBP Nil) was recognised in the profit or loss with a corresponding credit to other reserves.
Movement in the number of share options outstanding are as follows:
31 March 2020 31 March 2019
---------------------------------- ------------------------ --------------
At 1 April 21,774,234 23,274,234
Expired ( 21,774,234 ) (250,000)
At 31 March - 21,774,234
---------------------------------- ------------------------ --------------
Long Term Incentive Plan
In April 2019, the Board of Directors has approved the introduction of Long Term Incentive Plan ("LTIP"). The key terms of the LTIP are:
The number of performance-related awards is 14 million ordinary shares (the "LTIP Shares") (representing approximately 3.6 per cent of the Company's issued share capital). In addition to three executive directors, additional members of the senior management team will be included within the LTIP. The grant date is 24 April 2019.
The LTIP Shares were awarded to certain members of the senior management team as Nominal Cost Shares and will vest in three tranches subject to continued service with Group until vesting and meeting the following share price performance targets, plant load factor ("PLF") and term loan repayments of the Chennai thermal plant.
- 20% of the LTIP Shares shall vest upon meeting the target share price of 25.16p before the first anniversary for the first tranche, i.e. 24 April 2020, achievement of PLF during the period April 2019 to March 2020 of at least 70% at the Chennai thermal plant and repayment of all scheduled term loans;
- 40% of the LTIP Shares shall vest upon meeting the target share price of 30.07p before the second anniversary for the second tranche, i.e. 24 April 2021, achievement of PLF during the period April 2020 to March 2021 of at least 70% at the Chennai thermal plant and repayment of all scheduled term loans;
- 40% of the LTIP Shares shall vest upon meeting the target share price of 35.00p before the third anniversary for the third tranche, i.e. 24 April 2022, achievement of PLF of at least 70% at the Chennai thermal plant during the period April 2021 to March 2022 and repayment of all scheduled term loans.
The nominal cost of performance share, i.e. upon the exercise of awards, individuals will be required to pay up 0.0147p per share to exercise their awards
The share price performance metric will be deemed achieved if the average share price over a fifteen day period exceeds the applicable target price. In the event that the share price or other performance targets do not meet the applicable target, the number of vesting shares would be reduced pro-rata, for that particular year. However, no LTIP Shares will vest if actual performance is less than 80 per cent of any of the performance targets in any particular year. The terms of the LTIP provide that the Company may elect to pay a cash award of an equivalent value of the vesting LTIP Shares.
None of the LTIP Shares, once vested, can be sold until the third anniversary of the award, unless required to meet personal taxation obligations in relation to the LTIP award.
For LTIP Shares awards, GBP835,822 (FY19: nil) has been recognised in General and administrative expenses.
Grant date 24-Apr-19 24-Apr-19 24-Apr-19
Vesting date 24-Apr-20 24-Apr-21 24-Apr-22
Method of Settlement Equity/ Cash Equity/ Equity/ Cash
Cash
Vesting of shares (%) 20% 40% 40%
Number of LTIP Shares granted 2,800,000 5,600,000 5,600,000
Exercise Price (pence per share) 0.0147 0.0147 0.0147
Fair Value of LTIP Shares granted
(pence per share) 0.107493 0.121739 0.104486
Expected Volatility (%) 68.00% 64.18% 55.97%
23 Borrowings
The borrowings comprise of the
following:
Interest rate Final maturity 31 March 31 March
(range %) 2020 2019
------------------------- ------------------ ----------------- ----------- -------------
Borrowings at amortised
cost 10.35-11.40 June 2024 56,827,685 80,364,930
-------------
Total 56,827,685 80,364,930
---------------------------------------------------------------- ----------- -------------
The term loans of GBP49.9m and working capital loans of GBP6.9m taken by the Group are fully secured by the property, plant, assets under construction and other current assets of subsidiaries which have availed such loans. All Loans are personally guaranteed by a director.
Term loans contain certain covenants stipulated by the facility providers and primarily require the Group to maintain specified levels of certain financial metrics and operating results. As of 31 March 2020, the Group has met all the relevant covenants. Further, the Group raised approximately GBP 21.0 million (Rs.2000 million) during June 2020 through non-convertible debentures (NCDs) issue with a three years term and coupon rate of 9.85%. NCD's proceeds was used to repay the FY21 and FY22 (i.e. to March 2022) principal term loans obligations. This will substantially release the cash flow burden for next two financial years on account of loan repayment obligations note 5(a).
The fair value of borrowings at 31 March 2020 was GBP56,827,685 (2019: GBP80,364,930). The fair values have been calculated by discounting cash flows at prevailing interest rates.
The borrowings are reconciled to the statement of financial position as follows:
31 March 31 March 2019
2020
--------------------------------------------------------- ----------- --------------
Current liabilities
Amounts falling due within
one year 23,746,229 28,869,722
Non-current liabilities
Amounts falling due after 1 year but not
more than 5 years 33,081,456 51,495,208
Total 56,827,685 80,364,930
--------------------------------------------------------- ----------- --------------
24 Trade and other payables
31 March 31 March 2019
2020
--------------------------- ----------- --------------
Current
Trade payables 45,300,370 45,300,370
Creditors for
capital goods 174,444 174,444
Total 45,474,814 45,474,814
Non-current
Security deposit from
customers - 14,085,854
Other payables 169,373 180,746
--------------
Total 169,373 14,235,485
--------------------------- ----------- --------------
Trade payables include credit availed from banks under letters of credit for payments in USD to suppliers for coal purchased by the Group. Other trade payables are normally settled on 45 days terms credit. The arrangements are interest bearing and are payable within one year. With the exception of certain other trade payables, all amounts are short term. Creditors for capital goods are non-interest bearing and are usually settled within a year. Other payables include accruals for gratuity and other accruals for expenses.
25 Related party transactions
Key Management Personnel:
Name of the party Nature of relationship
-------------------------------- ---------------------------------------------
Arvind Gupta Chairman
Avantika Gupta (from November Chief Operating Officer & Director
2018)
Dmitri Tsvetkov Chief Financial Officer & Director
Jeremy Warner Allen Deputy Chairman
Mike Grasby (resigned in Director
November 2019)
Ravi Gupta (resigned in Director
May 2018)
Jeremy Beeton (resigned Director
in March 2020)
N Kumar (from November Director
2019)
Related parties with whom the Group had transactions during the
period
Name of the party Nature of relationship
------------------------------
Padma Shipping Limited The company has joint control of the entity
Avanti Solar Energy Private Entity in which Key Management personnel
Limited has Control/Significant Influence (subsdiary
from FY 19 note 7(b))
Mayfair Renewable Energy Entity in which Key Management personnel
Private Limited has Control/Significant Influence (subsdiary
from FY 19 note 7(b))
Avanti Renewable Energy Entity in which Key Management personnel
Private Limited has Control/Significant Influence (subsdiary
from FY 19 note 7(b))
Brics Renewable Energy Entity in which Key Management personnel
Private Limited has Control/Significant Influence (subsdiary
from FY 19 note 7(b))
Avantika Gupta Relative of Key Management Personnel (became
Ravi Gupta Director on 27 November 2018)
Relative of Key Management Personnel
Summary of transactions with related parties
Name of the party 31 March 2020 31 March 2019 Avantika Gupta a) Remuneration (up to 27 November 2018) 120,000 79,084 Summary of balance with related parties Name of the Nature of balance 31 March 2020 31 March 2019 party Padma Shipping Limited Investment 3,438,682 3,485,837 Padma Shipping Limited Advances 1,727,418 1,727,418 Padma Shipping Limited Impairment provision (5,176,300) (4,257,868) Ravi Gupta Land Lease Deposit 492,973 502,869
Outstanding balances at the year-end are unsecured. Related party transaction are on arms length basis. There have been no guarantees provided or received for any related party receivables or payables except for corporate guarantees issued to lenders of its subsidiaries classified as Asset Held for Sale of GBP28,261,524 (2019: GBP32,132,255). For the year ended 31 March 2020, the Group has not recorded any impairment of receivables relating to amounts owed by related parties GBPNil (2019: GBPNil). However, the Group has made impairment provision for investments in joint venture GBP918,432 (2019: GBP1,000,000) (Note 7(a)). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
A director personally guaranteed loans of a solar subsidiary (loan outstanding GBP9,372,074 (2019: GBP10,360,066)) which is classified as Asset Held for Sale. All Loans are personally guaranteed by a director.
26 Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the parent company as the numerator (no adjustments to profit were necessary for the year ended March 2020 or 2019).
The Company has issued options and LTIP over ordinary shares which could potentially dilute basic loss per share in the future. There is no difference between basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive.
The weighted average number of shares for the purposes of diluted earnings per share can be reconciled to the weighted average number of ordinary shares used in the calculation of basic earnings per share (for the Group and the Company) as follows:
Particulars 31 March 31 March 2019
2020
Weighted average number of shares
used in basic earnings per share 390,923,328 367,650,606
Shares deemed to be issued for no consideration
in respect of share based payments 2,190,519 -
Weighted average number of shares
used in diluted earnings per share 393,113,847 367,650,606
31 March
27 Directors remuneration 2020 31 March 2019
Arvind Gupta 500,000 500,000
Avantika Gupta (became Director on 27 November
2018) 120,000 64,691
Dmitri Tsvetkov 240,000 288,000
Jeremy Warner Allen 50,000 50,000
N Kumar (from November 2019) 15,000 -
Mike Grasby (resigned in November 2019) 33,750 45,000
Jeremy Beeton (resigned in March 2020) 43,270 45,000
Total 1,002,020 992,691
The above remuneration is in the nature of short-term employee benefits. As the future liability for gratuity and compensated absences is provided on actuarial basis for the companies in the group, the amount pertaining to the directors is not individually ascertainable and therefore not included above.
28 Commitments and contingencies
Operating lease commitments
The Group leases office premises under operating leases. The leases typically run for a period up to 5 years, with an option to renew the lease after that date. None of the leases includes contingent rentals.
Non-cancellable operating lease rentals are payable as follows:
31 March 2019
Not later than
one year 46,095
Later than one year and not later than
five years 64,254
Total 110,349
Recognition of a right of use asset and a lease liability is not material and instead charge of GBP55,292 (2019: GBP41,301) has been recognised as an expense for leases.
Contingent liabilities
Disputed income tax demand GBP1,021,210 (2019: GBP1,056,154).
Future cash flows in respect of the above matters are determinable only on receipt of judgements / decisions pending at various forums / authorities.
Guarantees and Letter of credit
The Group has provided bank guarantees and letter of credits (LC) to customers and vendors in the normal course of business. The LC provided as at 31 March 2020: GBP30,912,751(2019: GBP32,373,664) and Bank Guarantee (BG) as at 31 March 2020: GBP3,167,066 (2019: GBP6,457,430). LC are supporting accounts payables already recognised in statement of financial position. There have been no guarantees provided or received for any related party receivables or payables except for corporate guarantees issued to lenders of its subsidiaries classified as Asset Held for Sale of GBP28,261,524 (2019: GBP32,132,255). BG are treated as contingent liabilities until such time it becomes probable that the Company will be required to make a payment under the guarantee.
29 Financial risk management objectives and policies
The Group's principal financial liabilities, comprises of loans and borrowings, trade and other payables, and other current liabilities. The main purpose of these financial liabilities is to raise finance for the Group's operations. The Group has loans and receivables, trade and other receivables, and cash and short-term deposits that arise directly from its operations. The Group also hold investments designated financial assets measured at FVPL categories.
The Group is exposed to market risk, credit risk and liquidity risk.
The Group's senior management oversees the management of these risks. The Group's senior management advises on financial risks and the appropriate financial risk governance framework for the Group.
The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:
Market risk
Market risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. Financial instruments affected by market risk include loans and borrowings, deposits, financial assets measured at FVPL.
The sensitivity analyses in the following sections relate to the position as at 31 March 2020 and 31 March 2019
The following assumptions have been made in calculating the sensitivity analyses:
(i) The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the net interest income for one year, based on the average rate of borrowings held during the year ended 31 March 2020, all other variables being held constant. These changes are considered to be reasonably possible based on observation of current market conditions.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with average interest rates.
At 31 March 2020 and 31 March 2019, the Group had no interest rate derivatives.
The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. If interest rates increase or decrease by 100 basis points with all other variables being constant, the Group's profit after tax for the year ended 31 March 2020 would decrease or increase by GBP568,277 (2019: GBP803,649).
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The Group's presentation currency is the Great Britain GBP. A majority of our assets are located in India where the Indian rupee is the functional currency for our subsidiaries. Currency exposures also exist in the nature of capital expenditure and services denominated in currencies other than the Indian rupee.
The Group's exposure to foreign currency arises where a Group company holds monetary assets and liabilities denominated in a currency different to the functional currency of that entity:
As at 31 March 2020 As at 31 March 2019
Currency Financial Financial liabilities Financial Financial liabilities
assets assets
United States Dollar
(USD) 4,275,436 30,575,559 8,242,631 39,040,874
--------------------- ----------
Set out below is the impact of a 10% change in the US dollar on profit arising as a result of the revaluation of the Group's foreign currency financial instruments:
As at 31 March 2020 As at 31 March 2019
Currency Closing Rate Effect of 10% Closing Rate Effect of 10%
(INR/USD) strengthening (INR/USD) strengthening
in USD against in USD
INR - Translated against INR
to GBP - Translated
to GBP
United States
Dollar (USD) 75.10 2,122,208 69.32 2,681,169
The impact on total equity is the same as the impact on net earnings as disclosed above.
Credit risk analysis
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing activities, including short-term deposits with banks and financial institutions, and other financial assets. Further, the global economy has been severely impacted by the global pandemic COVID-19 (Note 5(a)).
The maximum exposure for credit risk at the reporting date is the carrying value of each class of financial assets amounting to GBP33,986,093 (2019: GBP49,388,558) and corporate guarantees issued to lenders of its subsidiaries classified as Asset Held for Sale of GBP28,261,524 (2019: GBP32,132,255).
The Group has exposure to credit risk from accounts receivable balances on sale of electricity. The operating entities of the group has entered into power purchase agreements with distribution companies incorporated by the Indian state government (TANGEDCO) to sell the electricity generated therefore the group is committed to sell power to these customers and the potential risk of default is considered low. For other customers, the Group ensures concentration of credit does not significantly impair the financial assets since the customers to whom the exposure of credit is taken are well established and reputed industries engaged in their respective field of business. It is Group policy to assess the credit risk of new customers before entering contracts and to obtain credit information during the power purchase agreement to highlight potential credit risks. The Group have established a credit policy under which customers are analysed for credit worthiness before power purchase agreement is signed. The Group's review includes external ratings, when available, and in some cases bank references. The credit worthiness of customers to which the Group grants credit in the normal course of the business is monitored regularly and incorporates forward looking information and data available. The receivables outstanding at the year end are reviewed till the date of signing the financial statements in terms of recoveries made and ascertain if any credit risk has increased for balance dues. Further, the macro economic factors and specific customer industry status are also reviewed and if required the search and credit worthiness reports, financial statements are evaluated. The credit risk for liquid funds is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
To measure expected credit losses, trade and other receivables have been grouped together based on shared credit risk characteristics and the days past due. The Group determined that some trade receivables were credit impaired as these were long past their due date and there was an uncertainty about the recovery of such receivables. The expected loss rates are based on an ageing analysis performed on the receivables as well as historical loss rates. The historical loss rates are adjusted to reflect current and forward looking information that would impact the ability of the customer to pay.
Trade and other receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of the debtor to engage in a repayment plan, the debtor is not operating anymore and a failure to make contractual payments for a period of greater than 180 days.
31 March 2020 Within Credit Days past due
period
More than More than More than Total
30 days 60 days 180 days
Expected loss rate 0% 0% 0% 17.23%
Gross carrying
amount - Trade
Receivables -TANGEDCO 2,378,240 3,953,961 5,310,071 18,734,652 30,376,924
Gross carrying
amount - Trade
Receivables -Others 7,824,720 608,495 889,434 5,286,795 14,609,444
General loss allowance(1) 4,138,025 4,138,025
Specific loss allowance(1) 13,970,007 13,970,007
Total loss allowance - - - 18,108,033 18,108,033
(1) There has been significant increase in loss allowance in FY20 GBP17 million (FY19 GBP0.8 million) primarily on account of contractual claim made on customer towards change in law as per Power Purchase Agreement of GBP6.4 million, tariff discount dispute of GBP7.5 million and change in credit risk of customer constituting general loss allowance of GBP3.1 million.
31 March 2019 Within Credit Days past due
period
More than More than More than Total
30 days 60 days 180 days
Expected loss rate 0% 0% 0% 19.07%
Gross carrying
amount - Trade
Receivables -TANGEDCO 4,616,792 2,120,998 6,657,543 2,633,639 16,028,972
Gross carrying
amount - Trade
Receivables -Others 22,093,386 2,169,134 7,034,955 2,933,211 34,230,686
Loss allowance - - - 1,061,553 1,061,553
The closing loss allowances for trade receivables as at 31 March 2020 reconcile to the opening loss allowances as follows:
31 March 2020 31 March 2019
Opening loss allowance as
at 1 April (1,061,553) (271,116)
Increase in loss allowance
recognised in profit or (loss)
during the year for new receivables
recognised (17,046,480) (790,437)
Total (18,108,033) (1,061,553)
The Group's management believes that all the financial assets, except as mentioned above are not impaired for each of the reporting dates under review and are of good credit quality.
Liquidity risk analysis
The Group's main source of liquidity is its operating businesses. The treasury department uses regular forecasts of operational cash flow, investment and trading collateral requirements to ensure that sufficient liquid cash balances are available to service on-going business requirements. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 90 day projection. Long-term liquidity needs for a 90 day and a 30 day lookout period are identified monthly.
The Group maintains cash and marketable securities to meet its liquidity requirements for up to 60 day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The following is an analysis of the group contractual undiscounted cash flows payable under financial liabilities at 31 March 2020 and 31 March 2019:
As at 31 March
2020
Current Non-Current Total
Within 12 1-5 years Later than
months 5 years
Borrowings 23,746,229 33,081,456 - 56,827,685
Interest on borrowings 6,595,187 10,464,236 - 17,059,422
Trade and other
payables 42,790,023 169,373 - 42,959,396
Liabilities held
for sale 32,866,783 - 32,866,783
Other current liabilities 582,241 - 582,241
Total 106,580,463 43,715,065 - 150,295,527
As at 31 March
2019
Current Non-Current Total
Within 12 1-5 years Later than
months 5 years
Borrowings 28,869,722 51,495,208 - 80,364,930
Interest on borrowings 8,507,484 17,059,422 - 25,566,906
Trade and other
payables 45,474,814 14,235,485 - 59,710,299 Provision for pledged deposits - 12,627,381 12,627,381 Liabilities held for sale 33,601,291 - - 33,601,291 Other current liabilities 91,764 - - 91,764 Total 116,545,075 95,417,496 - 211,962,571
Capital management
Capital includes equity attributable to the equity holders of the parent and debt less cash and cash equivalents.
The Group's capital management objectives include, among others:
-- Ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value
-- Ensure Group's ability to meet both its long-term and short-term capital needs as a going concern;
-- To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years end 31 March 2020 and 31 March 2019.
The Group maintains a mixture of cash and cash equivalents, long-term debt and short-term committed facilities that are designed to ensure the Group has sufficient available funds for business requirements. There are no imposed capital requirements on Group or entities, whether statutory or otherwise.
The Capital for the reporting periods under review is summarised as follows:
31 March 31 March 2019
2020
Total equity 158,503,833 154,383,407
Less: Cash and cash equivalents (3,438,830) (2,185,570)
Capital 155,065,003 152,264,447
Total equity 154,383,407
Add: Borrowings (including buyer's credit) 158,503,833 80,364,930
Overall financing 215,331,518 234,748,337
Capital to overall financing ratio 0.72 0.65
30 Summary of financial assets and liabilities by category and their fair values
Carrying amount Fair value
March 2020 March 2019 March 2020 March 2019
--------------
Financial assets
Debt instruments measured
at amortised cost
-- Cash and cash equivalents
(1) 3,438,830 2,118,960 3,438,830 2,118,960
-- Restricted cash (1) 7,524,612 23,547,870 7,524,612 23,547,870
-- Current trade receivables
(1) 26,901,986 49,198,105 26,901,986 49,198,105
-- Other long-term assets 509,628 518,553 509,628 518,553
-- Other short-term assets 6,701,345 6,288,901 6,701,345 6,288,901
Financial instruments measured
at fair value through profit
or loss
-- Other short term assets
- (Note (7)(c)) 741,425 40,453 741,425 40,453
45,817,826 81,712,842 45,817,826 81,712,842
--------------
Financial liabilities
Term loans 56,827,685 80,364,930 56,827,685 80,364,930
Current trade and other
payables (1) 42,790,023 45,474,814 42,790,023 45,474,814
Provision for pledged
deposits - 12,627,381 - 12,627,381
Non-current trade and
other payables (2) 169,373 14,235,485 169,373 14,235,485
99,787,081 152,702,610 99,787,081 152,702,610
The fair value of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a liability (i.e. a exit price) in an ordinary transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values:
1. Cash and short-term deposits, trade receivables, trade payables, and other borrowings like short-term loans, current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. The fair value of loans from banks and other financial indebtedness, obligations under finance leases, financial liabilities at fair value through profit or loss as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt or similar terms and remaining maturities.
3. Fair value of financial assets measured at FVPL held for trading purposes are derived from quoted market prices in active markets. Fair value of financial assets measured at FVPL of unquoted equity instruments are derived from valuation performed at the year end. Fair Valuation of retained investments in PS and BVP is on basis of the last transaction.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial instruments measured at fair Level Level Level value through profit or loss 1 2 3 Total ---------------------------------------- -------- ------ 2020 Unquoted securities - 700,972 40,453 Total - 700,972 40,453 ---------------------------------------- -------- ------ 2019 Unquoted securities - - 40,453 Total - - 40,453 ---------------------------------------- -------- ------
There were no transfers between Level 1 and 2 in the period. Investments in mutual funds are valued at closing net asset value (NAV).
The Group's finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance team reports directly to the chief financial officer (CFO).
Valuation processes and fair value changes are discussed by the Board of Directors at least every year, in line with the Group's reporting dates.
31 Post - reporting date events
The Group raised approximately GBP21.0 million INR 2000 million) during June 2020 through non-convertible debentures (NCDs) issue with a three years term and coupon rate of 9.85%. The proceeds from the NCDs were used to repay the FY21 and FY22 (i.e. to March 2023) principal term loans obligations.
-ends-
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