it is the unseen power that is propelling
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It is the unseen power that is propellingthe progress at Suzlon – one of theworld’s fastest growing wind energycompanies.
Suzlon offers solutions across the windenergy value chain, fromconceptualization, design andmanufacturing to operations andmaintenance services.
The Company has aligned its capabilitiesand strategies to its vision and harnessedthe best of resources to create world classproducts and services.
Suzlon with its fully integrated businessmodel has risen to become the world’s5th largest player in the wind energyindustry. The company is on an aggressivegrowth path; by leveraging innovation,futuristic technologies and businessacumen, Suzlon is set to usher in the windof change in the global energy market.
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Company information
BOARD OF DIRECTORS Tulsi R. Tanti Chairman & Managing DirectorGirish R. Tanti Director (International Business Development & HR)
Ajay Relan Representative Director of CIFCAshish Dhawan DirectorPradip Kumar Khaitan DirectorV. Raghuraman Director
COMPANY SECRETARY Hemal A. Kanuga
AUDITORS SNK & Co. S.R. Batliboi & Co.Chartered Accountants Chartered Accountants111, Nalanda Enclave The Metropole, F-1Pritamnagar, Ellisbridge 1st Floor, Bund Garden RoadAhmedabad – 380 006 Pune – 411 001
BANKERS Bank of Baroda Punjab National BankBank of Maharashtra Standard Chartered BankCitibank, N.A. State Bank of Bikaner & JaipurDeutsche Bank AG State Bank of IndiaHDFC Bank Ltd. State Bank of IndoreIndustrial Development Bank of India Ltd. State Bank of PatialaIndian Overseas Bank UTI Bank Ltd.ING Vysya Bank Ltd.
REGD. OFFICE “Suzlon”, 5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009Tel. :+91-79-2647 1100Fax :+91-79-2656 5540
CORPORATE OFFICE 5th Floor, Godrej Millennium9, Koregaon Park RoadPune – 411 001Tel :+91-20-2620 2000Fax :+91-20-2620 2100
BRANCH OFFICES Bangalore Jaipur RajkotChennai Kolkata SuratCoimbatore Mumbai ThiruvananthapuramHyderabad New Delhi VadodaraIndore
REGISTRAR AND SHARE Karvy Computershare Private LimitedTRANSFER AGENTS Karvy House, 46, Avenue 4
Street No.1, Banjara HillsHyderabad – 500 034Tel. : +91-40-2332 3031Fax : +91-40-2330 4703E-mail : suzlon.ipo@karvy.comWebsite: www.karvy.com
FACTORY LOCATIONS Survey No. 588PaddarBhuj – 370 105
Plot No H-24 & H-25M.G. Udyognagar Indl. EstateDabhelDaman – 396 210
Plot No. 306/1 & 3Bhimpore, Nani DamanDaman – 396 210
Survey No.42/ 2 & 3, 54, 1 to 8Bhenslore Road, DunethaDaman – 396 210
Survey No: 282Chhadvel (Korde), SakriDhule – 424 305
Survey No. 574, 59ThiruvandarkoilThribhuvani RoadPondicherry – 605 107
Plot No. 50, 51, 52, 54 & 55Opp. Manjusar GIDCVadodara – 391 775
Tulsi R. TantiChairman & Managing Director
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Dear Shareholders,
Your conviction and belief in Suzlon found expression
in your overwhelming response to our Initial Public
Offering. This has furthered our responsibility and
commitment towards a cleaner, greener world. It is
our endeavour to ensure that your Company leads in
the world’s pursuit towards generating energy from
clean, sustainable and renewable sources.
It is with a lot of humility and pride that I look back a
little over ten years to when your Company began with a
dream, and in this watershed year has emerged as the
fastest and most profitable global player in the wind
energy space. Finding our place amongst the top five
global players and securing over 6% global market share
is a good beginning. I say it is just the beginning, because
your Company is on the threshold of penetrating the
global wind energy market in a big way. Your Company
secured around 92% of its sales in FY 2005-06 in India,
amounting to approximately 887 MW, the fourth largest
market for wind energy in the world. Building on the
strength of success in the Indian market and learning
from initial forays into the global market, your Company
plans to build a significant presence in the global market.
THE WIND IN OUR SAILS
Energy and energy prices are a determining factor in
politics, geo-politics and in the growth of economies
today. Energy is at the heart of two global challenges
- firstly, with rising energy prices, how do economies
remain competitive and growing? Secondly, how do
you prevent adverse environmental impact, such as
global warming, in which the increased use of
conventional fossil fuels may play a part?
While what is visible and talked about are the rising
oil prices; energy security and environment protection
and conservation are even greater and more persistent
challenges in today’s world.
Today, there is a global consensus that the reliance on
fossil fuels needs to be reduced, and that renewable
energy sources offer energy diversity. And these are
the ‘winds of change’ driving the need and demand
for renewable energy the world over.
Wind energy clearly leads in the renewable energy
space. Cumulative wind power installations the world
over are expected to reach 298,000 MW in 2015. This
will translate to 2.93% of the global energy generation
in 2015, compared to wind’s contribution of 0.69%
of total generation in 2005. Wind power emerged as
Chairman’s message
the fastest growing energy source in 2005, growing
at approximately 40% - probably one of the very few
industries to register such aggressive growth globally!
Today there is a consensus on projections for the
growth of the wind energy sector globally –
conservative estimates point to a CAGR of 21% over
the next five years, and total cumulative installations
of nearly 150,000 MW by 2010, up from current
installed capacity of 59,264 MW.
WIND ENERGY-CONSTRAINED BY SUPPLY, NOT DEMAND
Europe has long been the preeminent leader in wind
energy. Denmark, for instance, generates 20% of its
power requirement from wind, and Germany led the
world at the end of 2005 with wind power
installations of 18,445 MW. In the United States,
experts estimate that the wind potential of just three
states – Texas, Kansas and North Dakota – to be equal
to approximately half the electricity consumption of
the entire United States. In Asia, China has set for
high growth in wind energy with a new Renewable
Energy Law targeting 5,000 MW from renewable
sources by 2010, and 30,000 MW by 2020. These
targets are expected to raise the contribution of
renewable sources up to 10% of total consumption
by 2020. In 2005, China ranked first in terms of
average wind capacity installation growth over the
past three years, followed closely by India. India’s
aggressive growth track also reflects in its ranking as
the fourth largest wind energy market in the world in
2005. With other countries in the region like South
Korea and Australia also making strong commitments
to renewables, the potential for the growth of wind
energy across the world is very high.
Governments across the world have demonstrated
their support for renewable energy through favourable
policies - fixed tariffs for renewable-powered
electricity, Renewable Portfolio Standards (RPS), tax
related benefits (Production Tax Credits and similar),
investment grants and the carbon credit mechanisms.
All these factors indicate a steadily increasing demand
for wind energy, which will be a big force in driving
capacity addition in the energy space.
Suzlon has built its competencies, capabilities and
capacities to obtain a very significant share of these
‘winds of change’. In the past year, it grew its output,
revenues and profits by 91%, 98% and 108%
respectively. At Suzlon, we have planned and
implemented our investments well in advance to gear
up to capitalize on the global opportunity, and we
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have aligned ourselves to changing customer needs
and the emerging trends of the industry.
INDUSTRY TRENDS
Economic growth has always been the barometer to
test the demand for energy. With the global economic
engine powering forward, projections point to the
demand for energy doubling by 2030. With growing
demand and the need to replace ageing infrastructure,
incremental addition of 4,800 GW of capacity will be
required.
The past year has seen significant developments in
the wind energy sector, in the form of globalization
and consolidation. Further, the following trends are
clearly seen:
Cost of wind generated electricity has become
more competitive, offering virtually limitless
supplies of inexpensive, clean, green energy
Demand continues to significantly outstrip supply
Continued up-scaling of wind turbine models
Supply chain bottlenecks
Customer group largely dominated by utilities,
large energy companies and financial institutions
Though Europe continues to lead, other markets
are poised to scale-up quickly – with US, India,
China leading the way and emerging European
markets like UK, Portugal, Italy, Greece and
France following suit.
YOUR COMPANY AND THE INDUSTRY
Your Company strives to outperform the industry. For
instance, the wind energy industry has grown during
2000-05 at a CAGR of 26.3%, whereas Suzlon has grown
at 64.0%, in terms of cumulative installations.
TAKING ON THE GLOBAL OPPORTUNITY
It is evident that the market for wind energy is growing
across the world, and this growth will accelerate
further. Suzlon is focused on leading the way in
participating and capitalizing on the opportunity.
Changing from the earlier focus on the Indian market,
your Company has gone international – emerging as a
global player through expansion in key international
markets: Australia, China, South Korea and USA. Your
Company today has presence in all leading markets
across the world, and endeavors to lead in the markets
of China, India, USA, emerging European markets and
niche markets in Asia Pacific.
Suzlon has set up its international business headquarters
in Denmark to drive the Company’s global growth plans.
Suzlon is setting up manufacturing facilities in the China
and USA to strengthen its presence in the global
marketplace. In addition to this, Suzlon has invested in
local infrastructure and built competencies in Australia,
China and USA to manage and grow business
independently in these markets. With these initiatives
Suzlon has clearly stated its intention of becoming a
major player in the global wind energy market.
INTEGRATING VERTICALLY
Today, one of the major challenges faced by the
industry is control over its entire supply and value
chain. Recognizing the significance of this challenge
early on, your Company took its’ first steps towards
vertical integration of its value chain by setting up of
its first wind turbine component facility for rotor
blades in 2001. The Company has continued to expand
capacities and add manufacturing facilities of other
critical wind turbine components in past years.
Your Company has further improved its control over
the value chain by setting up Suzlon Generators
Private Limited in joint venture with Elin EBG Motoren
GmbH of Austria to manufacture generators for wind
turbines. The Company also moved to set up Suzlon
Structures Private Limited to manufacture tubular
towers for wind power projects. More recently, your
Company acquired Hansen Transmissions International
NV, one of the world leaders in gearbox technology,
at an enterprise value of Euro 465 million. This deal
marked the second largest international acquisition
by any Indian company in the private sector.
In line with its strategy, your Company has developed
control over critical technology and built up
manufacturing capability for all the key components
of the wind turbine generators; namely, rotor blades,
generators, gearboxes, control systems and towers.
Early efforts to vertically integrate its operations and
manufacture critical components helped your
Company to integrate component technologies into
the total turbine solution. This has helped your
Company develop technologically superior, more
reliable, and competitive turbines; resulting in the
Company maintaining its strong position in the
marketplace in times of severe supply bottlenecks.
Suzlon has also applied the integrated approach to its
business model, developing capability with its
associates concerns to offer integrated wind energy
solutions from concept to commissioning to lifetime
care. The scope of solutions offered cover services
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ranging from conceptualisation, design, and
manufacturing to EPC project delivery and lifetime
operations & maintenance services.
The Company’s strategic drive towards achieving
complete control over its supply chain will make your
Company one of the most integrated turbine
manufacturers in the world.
LEADING THE INVESTOR COMMUNITY
You would be glad to know that in just months after
the IPO, your Company has been selected for inclusion
in the prestigious S&P CNX Nifty Index, one of the
benchmark indices of the Indian capital markets.
I believe this landmark event is recognition of the
faith and trust that you placed in your Company, and
I look forward to your continued support over the
coming years.
INNOVATION, FUNDAMENTAL TO OUR EXISTENCE
At Suzlon, we apply innovation not only in R&D for new
products, but also implementing innovative business
ideas and concepts to enhance business performance.
Innovation is everywhere in your Company and is
fundamental to its existence. Innovation drives us
and is our stimulus for growth. Quite simply, we are,
because we innovate.
Innovation at Suzlon is:
Continued emphasis on research and development
to create superior technology
Applying creativity and foresight to change
management
A relentless drive towards success amidst
dynamic market realities
Creation and exploitation of market potential
in markets where none existed before.
THE HUMAN FACTOR
People are our key asset and your Company is all about
people. Your Company has grown from strength to
strength not only in its revenues, but also its human
capital. At the end of the financial year 2005-06,
your Company employed over 5,300 people from
twelve nationalities in its operations worldwide.
We realize the importance of nurturing our talent
pool, and one of our key initiatives in this direction is
the establishment of Learning and Development (L&D)
Centers at key locations of the Company. The L&D
Centers establish career tracks for specialists, and
undertake leadership programs for executives.
A culture of meritocracy drives your Company. It
encourages a uniform, high performance culture that
motivates employees to excel at everything they do.
Your Company felicitates and recognizes employees
for their performance. To promote the spirit of
entrepreneurship and to reward employees for their
exceptional performance, your Company launched its
first Employee’s Stock Option Plan in 2005.
I take this opportunity to thank and congratulate
every employee of your Company for the
uncompromising dedication and hard work which
has enabled your Company to rise to rank amongst
the top in the wind energy arena.
STRENGTHENING THE BOARD
Mr. V. Raghuraman consented to join your Company’s
Board from October 2005. He is currently a Senior Advisor
(Energy) with the Confederation of Indian Industry and
has a primary specialization in Energy Management and
Energy Conservation. He also served as the Chairman of
the World Energy Efficiency Association, Washington.
We welcome him wholeheartedly to the Suzlon family
and look forward to his guidance.
WE CARE
Your Company is committed to being an active and
responsible member of every community worldwide
where we do business and has set the goal of becoming
the ‘best in class’ in corporate governance, business
practices, sustainability and corporate citizenship.
Your Company believes that corporations have
important social responsibilities and hence attempts
to contribute to such common objects by way of
charitable donations for education, organizing blood
donation camps of employees and running clinics for
the underprivileged.
To emerge as a global leader, I believe that pursuit of
goals with tenacity and integrity is essential. With the
enthusiastic and focused efforts of our team combined
with the growing confidence and trust placed in us
by all of you, I am confident that your Company will
become a formidable player for the global wind energy
companies in the years ahead.
Best wishes for a cleaner, greener and a more prosperous
tomorrow.
Place : New Delhi Tulsi R. TantiDate : May 15, 2006 Chairman & Managing Director
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BACKGROUND
Suzlon is world’s 5th largest wind turbine manufacturerwith a share of over 6% of the global wind energysector. The Company continued its leadership of theIndian wind energy market for the 8th consecutiveyear, with a market share of over 50% in 2005.
Since its inception in 1995, the Company has grownto a worldwide presence, employing over 5,300 people(as on March 31, 2006) from twelve nationalities inoperations in Australia, Belgium, China, Denmark,Germany, India, Netherlands and USA.
PRODUCTS
Suzlon manufactures state-of-the-art Wind TurbineGenerators (WTGs), with a portfolio of machines withcapacities ranging from 0.35 MW to 2.1 MW, cateringto the needs of everyone from small customers toutility scale investors. The comprehensive productrange also enables the Company to supply and executeprojects across the world with extremely varied windregimes and climatic conditions.
INTEGRATED SOLUTIONS
Suzlon along with its associates concerns offersintegrated wind energy solutions from concept tocommissioning to lifetime care; covering a gamut ofservices including conceptualisation, design,manufacture, EPC project delivery and operations &maintenance services.
Suzlon’s world class manufacturing capabilities andcomprehensive wind power solutions are backed bystringent international quality control and assurancesystems, such as the ISO 9001:2000, and typecertifications for individual WTG models.
VERTICAL INTEGRATION
Suzlon has grown into a fully integrated wind turbinemanufacturer. In addition to manufacturing WTGs,Suzlon also manufactures critical components suchas rotor blades, generators, gearboxes, control systemsand tubular towers for WTGs. The Company’s mainmanufacturing facilities are located at Daman,Pondicherry, Maharashtra and Gujarat in India. Suzlonis also setting up manufacturing facilities in Chinaand USA to meet the needs of the rapidly expandingwind energy markets in these geographies.
REACH
Suzlon’s global headquarters are located in Pune, Indiaand its international business headquarters inDenmark; with country headquarters for the Asia-Pacific, China and North America at Melbourne, Beijingand Chicago respectively. Suzlon drives its technologydevelopment from centers located in Germany, Indiaand The Netherlands.
PERFORMANCE
In the financial year 2005-06, Suzlon continued itstrajectory of growth, recording sales and EBIDTA ofRs. 3841.03 crore and Rs. 884.22 crore respectively, anincrease of 98% and 93% over the previous year. ProfitAfter Tax (PAT) rose from Rs. 365.33 crore in 2004-05to Rs. 759.50 crore in 2005-06, an increase of 108%.Suzlon’s EBIDTA margin stood strong at 23%.
During the year the Company raised funds throughan IPO of 29,340,000 equity shares of Rs.10 each forcash at a premium of Rs. 500 per equity sharesaggregating to Rs. 1,496.34 crore, consisting of afresh issue of 26,762,680 equity shares by theCompany and an offer for sale of 2,577,320 equityshares by Citicorp International Finance CorporationInc. The issue was oversubscribed by over 45 times.
The Company’s shares are listed on the National StockExchange of India Limited and Bombay Stock ExchangeLimited. The Company is ranked amongst the largestin the world in wind energy sector, and among thetop-10 of the Indian private sector in terms of marketcapitalization.
STRONG WINDS 2005-06
Suzlon, in 2005, climbed to the 5th positionglobally with 6.1% share of installationsworldwide and ranked 2nd in terms of annualgrowth, as per rankings published by BTMConsult ApS in the World Market Update 2005,a report on the global wind energy sector.
The Chairman and Managing Director of theCompany, Mr. Tulsi R. Tanti was awarded theLifetime Achievement Award “Best RenewableMan of the Decade” by the Foundation ofIndian Industry and Economists.
The Solar Energy Society of India (SESI)recognized Mr. Tulsi R. Tanti’s contribution tothe promotion of renewable energy in Indiawith the SESI “Pioneer Award”.
Suzlon expanded its global presence, securinglandmark breakthrough orders in Australia,China and South Korea; emerging markets forwind energy with high potential for growth.
The Suzlon family grew by over 150% - ourstrength rising from 2,100 personnel at thebeginning of FY 2005-06 to 5,300 personnel asof March 31, 2006.
Suzlon’s Initial Public Offering was met with anoverwhelming response, with the Institutionalportion over-subscribed approximately 68 timesand the HNI portion 40 times.
Suzlon’s global headquarters and WTGmanufacturing facility at Daman (Unit V) werecertified to ISO 14001:2004 and OHSAS18001:1999 standards by DNV (Det Norske Veritas).
Suzlon’s sales and profit after tax grew by 98%and 108% respectively for the financial yearended March 31, 2006.
Suzlon at a glance
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ContentsDirectors’ report 09
Management discussion and analysis 17
Report on corporate governance 25
Auditors’ report 39
Balance sheet 42
Profit and loss account 43
Cash flow statement 44
Schedules forming part of balance sheetand profit and loss account 45
Balance sheet abstract andCompany’s general business profile 71
Section 212 report 72
Auditors’ report onconsolidated financial statements 78
Consolidated balance sheet 80
Consolidated profit and loss account 81
Consolidated cash flow statement 82
Schedules forming part of consolidatedfinancial statements 83
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Dear Shareholders,
Your directors are pleased to present their eleventh annual report on the business and operations of the Company
together with audited accounts for the year ended March 31, 2006.
FINANCIAL RESULTS
The standalone audited financial results for the year ended March 31, 2006 are as follows:
Particulars Rs. in crore US$ in million*
2005-06 2004-05 2005-06 2004-05
Sales 3,788.46 1,917.50 849.14 438.34
Earnings / profit before interest, depreciation and tax (EBIDTA) 921.77 440.14 206.60 100.61
Add : Other income 69.28 23.26 15.53 5.32Less : Interest 42.52 31.93 9.53 7.30Less : Depreciation 45.87 38.97 10.28 8.91Less : Preliminary expenses written off 0.00 0.06 0.00 0.01
Profit before taxation 902.66 392.44 202.32 89.71
Less : Current tax 107.00 48.00 23.98 10.97Deferred tax (27.97) (17.08) (6.27) (3.90)Fringe benefit tax 2.40 0.00 0.54 0.00Earlier year 0.04 0.06 0.01 0.01
Net profit 821.19 361.46 184.06 82.63
Balance brought forward 526.95 306.63 118.11 70.09
Profit available for appropriations 1,348.14 668.09 302.17 152.72
Interim dividend on equity shares 71.88 23.18 16.11 5.30
Proposed dividend on equity shares 71.88 11.59 16.11 2.65
Dividend on preference shares 1.51 1.51 0.34 0.35
Tax on dividends 20.38 4.86 4.57 1.11
Transfer to general reserve 300.00 100.00 67.24 22.86
Surplus carried to balance sheet 882.49 526.95 197.80 120.45
* 1 US$ = Rs 44.615 as at March 31, 2006 (1US$ = Rs 43.745 as at March 31, 2005)
Directors’ report
APPROPRIATIONS
Dividend
An interim dividend of Rs. 2.50 per equity share (25%
on par value of Rs. 10.00) absorbing a sum of
Rs. 71.88 crore was paid in February 2006.
Your directors recommend a final dividend of Rs. 2.50
per equity share absorbing a sum of Rs. 71.88 crore for
the financial year 2005-2006 subject to the approval of
the shareholders at the ensuing Annual General Meeting.
Your directors have also recommended dividend of Rs. 10
per share absorbing a sum of Rs. 1.51 crore on 10%
cumulative redeemable preference shares of Rs. 100 each.
The total dividend payout ratio for the year 2005-
2006 is 17.69% (previous year 10.04%).
Transfer to reserves
An amount of Rs. 300 crore is proposed to be
transferred to general reserve.
INITIAL PUBLIC OFFER
The year 2005-06 saw a successful Initial Public
Offering of the Company. The issue was over subscribed
by 45.95 times and the equity shares were listed on
the National Stock Exchange of India Limited and
Bombay Stock Exchange Limited on October 19, 2005.
Your directors are happy to report that the listing has
enhanced our visibility and brand value.
The Initial Public Offering of 29,340,000 equity shares
of Rs. 10 each for cash at a premium of Rs. 500 per
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The Company’s strategic focus outside home market
is to expand globally in the leading markets like USA
and China and the emerging markets of Europe. The
international business headquarters established in
Denmark has successfully garnered large international
orders across America, Asia Pacific and Australia.
Your directors believe that the Company will continue
to enhance its market position as a result of some of
the following initiatives:
Enhanced manufacturing capabilities.
Expansion of operations across varied geographies.
Extended range of successful turbine models
and development of new models.
Continuous R&D, product development and up-
gradation in WTG and its components.
Focused vertical integration to enhance the value
chain, secure timely deliveries and enhance the
technological knowledge pool at component level.
Strategic acquisitions across the value chain of
wind energy solutions.
Strong trained, dedicated and motivated human
asset base in India and abroad.
CAPITAL EXPENDITURE
Your directors believe that cost competitiveness,
backward integration, control over supply chain and
efficiencies in working capital are the drivers for the
growth of scale in the coming years. In this direction,
the Company has undertaken various projects for
setting up of new manufacturing facilities as well as
expansion of existing facilities. During the year 2005-
06, new rotor blade manufacturing facilities at Bhuj
and Dhule were commissioned.
The Company augmented its storage and warehousing
facilities by establishing new warehouse premises at
Daman and storage facilities at Pondicherry. The
tooling facilities and nacelle cover manufacturing
facilities planned in Gujarat and Daman, respectively
are expected to be up and running by end of first
quarter of 2006-07. The manufacturing facilities for
tubular towers which were earlier planned in Andhra
Pradesh and Maharashtra are now being set up at
Dhule (Maharashtra). Further, CAPEX plans are under
consideration to set up manufacturing facilities for
forged components.
The integrated manufacturing facilities at Tianjin,
China and the rotor blade facilities at Pipestone, USA
equity share aggregating to Rs. 1,496.34 crore
consisted of a fresh issue of 26,762,680 equity shares
by the Company and an offer for sale of 2,577,320
equity shares by Citicorp International Finance
Corporation Inc. Thus the Initial Public Offering
constituted 10.20% of the fully diluted post issue
paid up capital of the Company.
BUSINESS OVERVIEW
The Company had a very successful year, with robust
growth in sales and profits. The sales were Rs. 3,788.46
crore and profit after tax was Rs. 821.19 crore, registering
a growth of 97.57% and 127.19%, respectively.
The strong performance of the Company is attributed
to increasing demand for Wind Turbine Generators
(WTGs) worldwide. There is a growing global
acceptance for increasing the share of renewable
energy in the energy-mix in most countries. This has
lead to the development of conducive policies world
over to support the growth of renewable energy. Wind
energy has emerged as the largest beneficiary as it is
commercially viable alternative, and has made a
significant contribution in the world energy market.
Cumulative wind power installations worldwide
reached 59,264 MW by the end of calendar year 2005.
The cumulative installations are expected to reach
nearly 150,000 MW at a CAGR of 21% by the year
2010 (source: BTM Consult ApS – March 2006).
India ranked fourth amongst the wind energy markets
worldwide for the calendar year 2005 with cumulative
installations of 4,253 MW accounting for 7.20% of
the global installed capacity. The Indian wind energy
market has shown a growth of 41.80% during the
said period (source: BTM Consult ApS – March 2006).
The Indian wind sector is expected to continue to
grow, given the power shortfalls, rising demand for
power, as well as the strong emphasis by the
government on the promotion of the sector. The Indian
wind power installations are expected to reach
12,253 MW by the end of year 2010 (source: BTM
Consult ApS – March 2006).
The Company was placed fifth worldwide in terms of
annual installations, and second in terms of increase
in market share during the calendar year 2005 (source:
BTM Consult ApS – March 2006).
The Company continues to dominate the Indian market
with market share of over 50% and operates in eight
states in India. It had cumulative global sales of
2,321 WTGs with total capacity of 2,108.09 MW on
March 31, 2006.
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are expected to begin commercial production by the
end of the second quarter of 2006-07.
The Company invested in expansion of its offices
infrastructure. During the year, it acquired new office
premises at Pune and Delhi. The Company proposes to
expand its Bangalore office. The Company also plans to
set up Corporate House, which will include the Corporate
Learning & Development Centre, together forming part
of the Company’s vision of “The Suzlon Campus” at Pune.
STRATEGIC INITIATIVES
Your directors are happy to report that the transaction
for the acquisition of 100% shareholding of Eve
Holding NV, Belgium by the Company’s Wholly Owned
Subsidiary (WOS) AE-Rotor Holding B.V., the
Netherlands (‘AE-Rotor’) for a total enterprise value
of Euro 465 Million between the Company, AE-Rotor,
Allianz Capital Partners GmbH and its affiliates and
Apax Partners Worldwide LLP, the sellers of the shares,
has been consummated.
On May 9, 2006, AE-Rotor, the WOS of the Company
completed the purchase of 100% of the share capital
of Eve Holding NV for a consideration of Euro 431.43
Million after having received all requisite approvals
for the acquisition. The Company now has 100%
ownership of Eve Holding NV and its WOS - Hansen
Transmissions International NV, Belgium, which is
engaged in the business of design, development,
manufacturing and supply of industrial and wind gear
boxes. The said acquisition has been financed by debt
of Euro 450 Million from ICICI Bank Limited, State
Bank of India, Deutsche Bank AG and Barclays Bank
PLC and for which the Company has provided its
corporate guarantee as security.
This acquisition of Hansen will enable the Company
to integrate gearbox technology into the total turbine
solution enabling a more reliable, technologically
superior and competitive turbine in the market place.
Your directors propose to run this company as an
independent business unit.
SUBSIDIARY COMPANIES
Domestic subsidiaries
Suzlon Engitech Private Limited (Formerly Sarjan
Engitech Private Limited), a company engaged in
production of various engineering products, became
a WOS of the Company in June 2005.
Suzlon Towers and Structures Limited (Formerly Suzlon
Green Power Limited), a WOS of the Company and
engaged in the business of setting up of independent
power projects has expanded its objects to include
business activity pertaining to towers.
The subsidiary company for manufacture of
generators – Suzlon Generators Private Limited –
commenced commercial production during the year
2005-06.
The other domestic subsidiaries, viz., Suzlon
Structures Private Limited, Suzlon Windfarm Services
Limited, Suzlon Gujarat Wind Park Limited and Suzlon
Power Infrastructure Private Limited, have continued
to perform satisfactorily.
Overseas subsidiaries
International Research & Development (R&D)
Subsidiaries of the Company, viz., AE-Rotor Holding
B.V., together with its step down subsidiaries - AE-
Rotor Techniek B.V., Suzlon Energy B.V. - in the
Netherlands and Suzlon Energy GmbH in Germany
continue to focus on design and development of world
class technologies.
During the year, the Company, through its newly
formed WOS Suzlon Windpark Management GmbH,
Germany and the existing WOS Suzlon Energy GmbH
acquired 100% stake in Windpark Olsdorf WATT GmbH
& Co KG (Germany). A new subsidiary – SE Drive Techneik
GmbH was also incorporated in Germany to carry out
Research and Development in the area of gearboxes.
Suzlon Windkraft GmbH (Formerly Constellation
GmbH), Germany engaged in design and development
for WTGs was taken over by SE Drive Techneik GmbH
during the year under review.
The WOS in Denmark – Suzlon Energy A/S which is
engaged in international business management –
along with its subsidiaries, viz., Suzlon Wind Energy
Corporation, USA, Cannon Ball Wind Energy Park-I,
LLC, USA and Suzlon Energy Australia Pty. Ltd.,
Australia have been successful in garnering
substantial business volumes – new and repeat orders
- across the globe.
The Company has incorporated two new WOS, viz.,
Suzlon Rotor Corporation, USA and Suzlon Energy
(Tianjin) Limited, China, respectively under which
manufacturing facilities for rotor blades, and an
integrated manufacturing facilities for WTGs, rotor
blades, nacelle covers, control panels and generators
will be set up. Both the manufacturing units are
expected to start commercial production by the end
of the second quarter of FY 2006-07.
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the first 1500 kW model during the year 2005-06.
HUMAN CAPITAL
The Company has always recognized the importance
of human capital and valued it highly. Human capital
at Suzlon has been one the key pillars of the Company’s
success. The Company has been able to attract, grow
and retain some of the best talent in the wind industry.
Lot of emphasis and efforts are made to create a
working environment that will encourage innovation,
enhance work satisfaction and build a merit driven
organizational culture. To meet the Company’s
phenomenal growth plans, the Company has been
able to scale up its human capital, with our manpower
strength growing from around 1,200 as on April 1,
2005 to around 3,200 employees as on March 31,
2006, a growth of over 150%.
The Company has been investing resources in
Learning and Development (L&D) initiatives. It has
established L&D Centres at its key locations for
development of its manpower worldwide. These
centres drive L&D initiatives for technical, functional
and behaviours areas.
QUALITY, HEALTH & SAFETY
The Company firmly believes that pursuit of excellence
is one of the most critical components for competitive
success. With Quality, Health & Safety (QES) as an
integral part of the Company’s belief structure, it
strives to deliver products and services maintaining
the highest levels of QES standards.
The Company has obtained integrated ISO 9001:2000
certificate recommendations from the world-
renowned Det Norske Veritas (DNV) for WTGs and rotor
blades. The Company has also received the ISO 14001
(Environmental) and ISO 18001 (OHSAS) certification
for facilities at two locations.
DEPOSITS
During the year, the Company has not accepted any
deposits within the meaning of the provisions of
Section 58A of the Companies Act, 1956.
DIRECTORS
Mr. Ashish Dhawan ceased to be the Nominee Director
of Chryscapital III, LLC, Mauritius and accordingly
resigned from the directorship of the Company with
The Company has also incorporated a new WOS in
Mauritius – Suzlon Energy Limited – which will engage
itself in the business of investment and holding as
also providing turnkey solutions for setting up of
windfarm projects.
In terms of the approval granted under Section
212(8) of the Companies Act, 1956 by the Ministry
of Company Affairs, Government of India vide its
letter No. 47/59/2006-CL-III dated February 23, 2006,
copy of the balance sheet, profit and loss account,
report of the Board of Directors and the report of
the auditors of the above referred subsidiaries have
not been attached to the balance sheet of the
Company. The Company will make available these
documents / details upon request by any member
of the Company interested in obtaining the same.
Also, the annual accounts of the subsidiaries would
be available for inspection by any member at the
registered office of the Company at “Suzlon”, 5,
Shrimali Society, Near Shri Krishna Complex,
Navrangpura, Ahmedabad – 380 009 and at the
corporate office of the Company at 5th Floor, Godrej
Millennium, 9, Koregaon Park Road, Pune – 411
001. However, pursuant to Accounting Standard
AS-21 issued by the Institute of Chartered
Accountants of India, consolidated financial
statements presented by the Company includes the
financial information of its subsidiaries.
Subsequent to the balance sheet date, the Mauritian
subsidiary has incorporated a new WOS in the U.K.
namely Suzlon Wind Energy Limited.
RESEARCH AND DEVELOPMENT
The Company is continuously striving to build its
technology leadership position in the wind industry.
There is strong focuses on incessant research and
development activities through its R&D Centres in the
Netherlands, Germany and in India where it employs
the best global talent in the industry. The R&D centres
are relentlessly working for improving the performance
and optimising the cost of its products.
The Company’s most popular model during the year
has remained the megawatt class 1250 kW turbine.
Going forward, the share of Multi-Megawatt 2100
kW turbine is expected to increase, especially in
markets like USA, Europe and Australia. The Company
has been successful in penetrating the India market
with the newly introduced 600 kW model and it sold
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effect from December 22, 2005. The Board expresses
its appreciation for the valuable services rendered
and matured advice provided by him during his
association with the Company as the representative
of Chryscapital III, LLC, Mauritius.
Mr. Ashish Dhawan, has been re-appointed as an additional
director of the Company in his individual capacity with
effect from December 28, 2005. In terms of Section 260
of the Companies Act, 1956, the said Additional Director
holds office upto the ensuing Annual General Meeting of
the Company and being eligible offers himself for
appointment as the Director of the Company.
Mr. V. Raghuraman who was appointed as an
additional director of the Company with effect from
October 29, 2005 holds office upto the ensuing
Annual General Meeting in terms of Section 260 of
the Companies Act, 1956 and being eligible offers
himself for appointment as the director of the
Company.
Mr. Tulsi R. Tanti and Mr. Pradip Kumar Khaitan, the
directors of the Company retire by rotation at the
ensuing Annual General Meeting and being eligible
offer themselves for re-appointment.
The brief resume of Mr. Tulsi R. Tanti, Mr. Ashish
Dhawan, Mr. Pradip Kumar Khaitan and Mr. V.
Raghuraman as required in terms of Clause 49 of the
listing agreement with the stock exchanges, is
provided in the corporate governance report as
annexed to the annual report.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act,
1956, the directors confirm that:
(a) in the preparation of the annual accounts, the
applicable accounting standards had been
followed along with proper explanation relating
to material departures;
(b) the directors had selected such accounting
policies and applied them consistently and made
judgements and estimates that are reasonable
and prudent so as to give a true and fair view of
the state of affairs of the Company as at March
31, 2006 and of the profit of the Company for
the year ended on that date;
(c) the directors had taken proper and sufficient
care for the maintenance of adequate accounting
records in accordance with the provisions of
this Act for safeguarding the assets of the
Company and for preventing and detecting fraud
and other irregularities;
(d) the directors had prepared the annual accounts
on a going concern basis.
EMPLOYEES’ STOCK OPTION PLAN 2005 (ESOP - 2005)
The Company has instituted ESOP – 2005 to reward
and help retain its employees and to enable them to
participate in its future growth and financial success.
ESOP - 2005 includes provision for the grant of options
to employees of the Company and its subsidiaries
except the subsidiaries in the United States of
America.
The following table sets forth the particulars of options
granted under the ESOP – 2005 as approved by the
shareholders in the Extraordinary General Meeting of
the Company dated June 16, 2005:
Total options granted 921,000under ESOP
Pricing formula 50% of the issue price
Options vested Nil
Options exercised Nil
Total number of equity 921,000shares arising as a resultof exercise of options
Options forfeited / lapsed 32,000
Variat ion in terms of Niloptions
Money realised by exercise Nilof options
Total number of options in 889,000force at the end ofthe year
Employee-wise details ofoptions granted to:
(i) Senior manager ia l Details annexed hereto.personnel
(ii) Any other employee Nilreceiving a grant inany one year ofoption amounting to5% or more of theoptions grantedduring the year2005-06
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(iii) Identified employees Nilwho were grantedoption, during anyone year, equal to orexceeding 1% of theissued capital(excluding outstandingwarrants and conver-sions) of the Companyat the time of grant.
Diluted Earnings Per Share Rs. 29.94(EPS) pursuant to issue ofshares on exercise ofoption calculated inaccordance with Account-ing Standard (AS 20‘Earnings Per Share’)
Difference, if any,between the employeecompensation cost calcu-lated using the intrinsicvalue of stock options andthe employee compensa-tion cost recognized if thefair value of the options hadbeen used and the impactof this difference on profitsand EPS of the Company.
Weighted average exercise Not Applicableprices and weightedaverage fair value ofoptions whose exerciseprice equals or exceeds oris less than the marketprice of the stock.
Description of the methodand significant assump-tions used during the yearto estimate fair values ofoptions, including thefollowing weighted-average information:
(i) Risk-free interest rate 8.00%
(ii) Expected life (years) 4.00
(iii) Expected volatility 0.500
(iv) Expected dividend yield 1.18%
(v) Price of the underlying Not Applicableshare in market at thetime of option grant.
Person-wise details of options granted to senior
managerial persons of the Company and its subsidiaries:
Name Designation Stockoptionsgranted
I.C. Mangal Head – BusinessDevelopment (West) 40,000
Kirti Vagadia Head – Corporate 40,000Finance
Praful Mehta Head – Purchase 40,000
R. Sridhar Head – Supply Chain 40,000Management
A.W.P. van Megen Vice President – 10,000International CorporateDevelopment
Nilesh Vaishnav Head – O&M, SWSL 26,000
T. Pradeep Kumar Head – Technology 10,000
Thorsten Spehr Head – WTG Design 30,000SEG, Germany
William Verheij Head – Rotor Blade R&D 15,000AERT, The Netherlands
The Securities and Exchange Board of India (SEBI) has
issued Securities and Exchange Board of India (Employees
Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines 1999. This is effective for all stock
options schemes established after June 19, 1999. In
accordance with these guidelines, the excess of the market
price of the underlying equity shares as of the date of
grant over the exercise price of the option, including
upfront payments, if any, is to be recognised and
amortized on a straight line basis over the vesting period.
Accordingly the Company has debited a sum of Rs. 10.36
crore to the profit and loss account for the year ended
March 31, 2006 under Employee Compensation Cost.
The equity shares issued under the ESOP – 2005 of the
Company shall rank pari-passu in all respects including
dividend with existing equity shares of the Company.
PARTICULARS OF CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO
Information as required under Section 217(1)(e) of
the Companies Act, 1956 read with the Companies
(Disclosure of particulars in the report of board of
directors) Rules, 1988 are set out hereunder.
Conservation of energy
The operations of the Company are not energy
intensive. However, energy conservation is a priority
area for the Company. Company’s continued efforts
to reduce and optimise the use of energy consumption
The Company has chargeda sum of Rs. 10.36 crore(Rs. 255 per option) beingthe intrinsic value of optionunder the ESOP 2005 forthe year ended March 31,2006. Had the Companyadopted the fair valuemethod based on “Black-Scholes” Model for pricingand accounting theoptions, the cost of optionwould have been Rs. 324.33per option and accordingly,the profit before tax wouldhave been lower by Rs. 2.82crore. The diluted earningsper share after factoringthe impact of fair valuewould have been Rs. 29.95per share instead of Rs.29.94 per share.
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have shown positive results. Better controls are planned
to achieve further reduction in energy consumption.
All the new manufacturing facilities of the Company
are equipped with hi-tech energy monitoring and
conservation systems to monitor usage, minimise
wastage and increase overall efficiency at every stage
of power consumption.
Power and fuel consumption
Particulars 2005-06 2004-05
Electricity
Through purchases
Purchased units 5,426,552 28,86,538Total amount (Rs.) 17,823,277 93,10,278Rate / unit (Rs.) 3.28 3.23
Through diesel generator
Units generated 841,961 252,447Total amount (Rs.) 7,949,866 18,24,894Cost / unit 9.45 7.23
Technology absorption
The Company continues to be ISO 9001 certified by
DNV for design, development and manufacture and
supply of WTGs and rotor blades. Constant research
and development for upgradation of technology,
design and indigenous development of components
have not only reduced dependence on external supply
chain but have also increased the power generation
from its WTGs at optimum levels. The WTGs of the
Company have been operating successfully in the
coastal region of Gujarat, the hilly terrains of
Maharashtra, high wind sites in Tamil Nadu, deserts
of Rajasthan and the extremely cold climates in the
United States of America.
Foreign exchange used and earned
Rs. in crore
Particulars 2005-06 2004-05
Total foreign exchange used 1,550.71 768.92
Total foreign exchange earned 212.83 2.80
PARTICULARS OF EMPLOYEES
In terms of the provisions of Section 217(2A) of the
Companies Act, 1956, read with the Companies
(Particulars of Employees) Rules, 1975 as amended,
the names and other particulars of the employees are
required to be set out in the Annexure to the Directors’
report. However, as per the provisions of Section
219(1)(b)(iv) of the said Act, the Annual Report
excluding the aforesaid information is being sent to
all the members of the Company and others entitled
thereto. Member who is interested in obtaining such
particulars may write to the Company Secretary at
the Registered Office of the Company.
CORPORATE GOVERNANCE
The Securities and Exchange Board of India (SEBI) has
prescribed certain corporate governance standards vide
Clause 49 of the listing agreement. Your Directors reaffirm
their commitment to these standards and a detailed report
on corporate governance together with the auditors’
certificate on its compliance is annexed hereto.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis on the
operations of the Company is provided in a separate
section and forms part of this report.
AUDITORS
M/s. SNK & Co., Chartered Accountants, Ahmedabad,
and M/s. S.R. Batliboi & Co., Chartered Accountants,
Pune, the joint statutory auditors of the Company
retire at the ensuing Annual General Meeting of the
Company. Both the statutory auditors have confirmed
their eligibility and willingness to accept office, if
re-appointed.
ACKNOWLEDGEMENT
The directors wish to place on record the co-operation
and support received from Government and Semi-
Government agencies, especially from the Ministry of
Non-conventional Energy Sources (MNES), all State
Level Nodal Agencies and all State Electricity Boards.
The directors are thankful to all the bankers and
financial institutions for their support to the Company.
The Board places on record its appreciation of
continued support provided by the valued customers,
suppliers, equipment vendors, partners and consultants.
The directors also acknowledge the hard work and
persuasive efforts put in by the employees of the
Company in carrying forward Company’s vision and
mission. The enthusiasm and continuous efforts of
the employees have enabled the Company to establish
itself as a global player.
The directors also express their gratitude to the
shareholders for their continuing confidence in the
Company.
For and on behalf of the Board of Directors
Place :New Delhi Tulsi R. TantiDate :May 15, 2006 Chairman & Managing Director
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INDUSTRY STRUCTURE AND DEVELOPMENTS
The demand for energy has a linear relationship
to the growth of the economy. This demand
for energy has witnessed a structural shift
towards renewable energy due to certain key
factors like rising fuel prices, increasing
concerns around environmental impact as well
as energy security.
Governments world over have shown their
support to renewable energy through favorable
policies, such as fixed tariffs for renewable
powered electricity, Renewable Portfolio
Standards (RPS), tax incentives, investment
grants, Carbon credit mechanisms etc.
Wind is the second largest source of renewable
energy. In 2005, the wind energy sector recorded
the highest growth of 40% YoY primarily due to
increase in activity in the United States, resurgence
of established markets like India, and growth in
new markets like China, France, Italy and Portugal.
The volume of new capacity added worldwide in
2005 was 11,407 MW and the cumulative
installations worldwide reached 59,264 MW at
the end of 2005. Globally, the industry has grown
at a CAGR of 24% in the past five years and is
expected to continue to grow at a CAGR of 21%,
to reach nearly 150,000 MW by the end of 2010.
Wind power installations in India alone are expected
to reach 12,250 MW by the end of 2010.
Europe had the highest new installations in 2005,
with its 6,372 MW accounting for approximately
55% of the global market additions. Asia showed
significant growth, almost doubling installations
in 2005 to 1,836 MW, compared to the 1,077
MW in 2004. India took the lead with 1,253 MW
Management discussion and analysis(Annexure to directors’ report)
of installed capacity in 2005, making it the fourth
largest wind energy market worldwide. China
showed great potential in the wind energy sector,
adding 569 MW.
Wind energy penetration into the global energy
market is expected to reach 2.93% in 2015, up
from 0.69% in 2005.
The trends in the wind energy sector indicate a
continuous scaling up of wind turbine generators
(WTGs). The average size of WTGs being installed
worldwide continued to get larger, however at
a slightly reduced pace than before. This trend
was also affected by the peculiarities of specific
geographies.
The demand for wind turbines outstripped
supply, primarily due to the scarcity of key
components. This situation has also contributed
to the increasing price of WTGs, and has also
resulted into wind turbine manufacturers
expanding capacity.
Wind power projects around the world are
getting larger in size and scale. The customer
profile is seeing a shift towards larger customers;
such as utilities and large energy companies.
The ability to raise large funds and manage
complex logistics issue has helped in the setting
up of large size wind farms. Currently, utilities
and large energy companies own and operate
nearly 30% of total wind installations worldwide.
OPPORTUNITIES
The global wind power market is estimated to
more than double with capacity addition of over
89,530 MW over the period 2006-10 as shown
below:
Country Cumulative % Share Estimated % Share Cumulative % ShareInstalled Capacity Capacity byCapacity between 2010
2005 2006-10
Europe 41,044 69% 46,650 52% 87,694 59%USA 9,181 15% 13,200 15% 22,381 15%India 4,253 7% 8,000 9% 12,253 8%China 1,264 2% 6,500 7% 7,764 5%Australia 717 1% 2,000 2% 2,717 2%Others 2,805 6% 13,180 15% 15,985 11%
59,264 100% 89,530 100% 148,794 100%
Source: BTM Consult ApS
Global installed capacity and estimated capacity addition
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India stood at 1,987.34 MW at the end of FY
2005-06, and India accounted for 94 percent
of its total MW sales.
With the opportunities listed above, we expect
the Indian market to grow and the Company to
maintain its position as the market leader in the
coming years.
China
China is emerging as a new market for Suzlon.
China has low cumulative installations in wind
energy at 1,264 MW in 2005 and the per capita
wind energy installation is amongst the lowest.
China is expected to add 6,500 MW in the next
five years.
Suzlon started with a representative office in
Beijing and is now setting up an integrated
manufacturing facility in Tianjin. Suzlon has
secured orders to supply 100 MW of capacity to
projects being set up in the country.
China is poised for an excellent growth and the
Company is gearing up to be a significant player
in that market in the coming years.
USA
USA is the fastest growing wind energy market
in the world. The market forecasts indicate that
in the next two years USA will become the top
country in terms of new annual installations.
Currently, the total installations stand next to
Europe at 9,181 MW and USA is expected to add
13,200 MW in the next five years.
Suzlon started its US operations in 2002-03,
and till date Suzlon has supplied nearly 100
MW. Suzlon has an order book of nearly 400
MW from the USA. Further the Company is
setting up a manufacturing facility for rotor
blades in the State of Minnesota.
We intend to focus on establishing ongoing
business relationships with a core group of key
customers, strategic investors and financial
investors, with a view to gain access to portfolio
of wind power projects.
The Company is working to be amongst the top
three in the US wind energy market.
Europe
Europe is currently the largest market for wind
energy in the world. Europe has 69% of the
total cumulative installations. The incremental
The Kyoto Protocol has laid down a worldwide
target for reduction in the global emission of
greenhouse gases by 5.3% by 2008-12,
compared to their actual levels in 1990.
Approximately 141 countries have shown their
support by adopting this protocol. Recent
European Union Directives stipulate the need to
help double the share of non-fossil renewable
energy sources, such as wind, from 6 percent to
12 percent of gross energy consumption in
Europe by 2010.
Some of the major markets for Suzlon and the
opportunities in those markets are as listed below:
India
The power industry in India has been
characterized by increasing demand for energy.
In 2005-06, demand for electricity exceeded
supply by an estimated 8.3% in terms of total
requirements.
The Government of India (GOI), in its mission
“Power for all by 2012”, estimates that installed
generation capacity in the country needs to
reach 200,000 MW by the end of its eleventh
Five Year Plan in 2012, compared to 124,287
MW as of March 31, 2006. With increasing
urbanisation, industrial growth and per-capita
consumption, the gap between the actual
demand and supply is likely to increase.
India is today the world’s fourth-largest market
for wind energy in terms of annual installations
with a global market share of 10.98%. India
added 1,253 MW of wind power in 2005 taking
its cumulative installation to 4,253 MW.
The wind energy sector has out performed the
BTM estimates on India. In the year 2003 BTM
projected India installing 500 MW in year 2005,
later revised to 900 MW. India surpassed this
estimate by installing 1,253 MW in 2005. BTM
now projects India to be one of the key
promising and emerging markets of the future.
Suzlon has been a market leader in India for
last 8 years consecutively, and has a market
share of over 50% in FY 2005-06. The primary
customers of the Company include companies
that have manufacturing facilities with high
power consumption, companies with high
profitability that seek investment opportunities
with stable returns, power utilities and State
nodal agencies. Cumulative sales of Suzlon in
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installations expected in Europe total to 46,650
MW by 2010.
The investment wave in Europe has been driven
by the EU’s renewables directive of 2001. The
cumulative installed capacity at the end of 2005
was 41,044 MW. The capacity installed in 2005
was 6,372 MW, which is expected to grow to
12,990 MW in 2010, making it imperative for
Suzlon to establish itself in the geography to
capitalize upon the opportunity.
Suzlon has established a subsidiary in Denmark,
Suzlon Energy A/S, to serve as international
business headquarters. The Company also plans
to establish its presence in the emerging
European markets. It expects European customers
to primarily consist of power utilities, wind
power project developers and private investors.
Australia
In Australia, about 1,700 MW of new projects
are in the pipeline. The Mandatory Renewable
Energy Target by the Australian Government is
low and restricts the installations to 4,000 MW
by 2010. However, the Australian wind power
industry estimates great potential in the space.
Suzlon has established Suzlon Energy Australia
Pty. Ltd. for managing its business activities in
Australia and New Zealand. Customers are
primarily expected to be primarily power utilities
and wind power project developers Suzlon has
secured an order to construct Australia’s largest
wind park of 94.5 MW of capacity.
Suzlon’s sustainable competitive advantage
Integrated solutions provider
Infrastructure development (in India)Wind resource assessmentLand acquisitionEvacuation facilities
Technology development
& WTG manufacturing
Project constructionInstallationCommissioning
Operation & maintenance services
The owner profile of wind turbines in India reflects a
‘low involvement’ buyer. Equipment sellers are expected
to offer services from concept to commissioning to
lifetime care of the wind farms; which is different
from other markets. To meet the Indian market demand,
the Company has developed resources and
competencies in the entire technical value chain, from
the identification of suitable sites, planning of wind
farms to their technical implementation, installation
and operations & maintenance services.
The Company established a subsidiary, Suzlon
Windfarm Services Limited, for managing the
operation and maintenance business for the Indian
market.
In the international market, Suzlon is primarily an
equipment supplier since site development and related
services are in most cases carried out by project
developer.
Vertical integration – A Suzlon differentiator
One of the critical differentiators for Suzlon has been
its early endeavor to vertically integrate its operations
and manufacture critical components in-house.
Suzlon’s manufacturing facilities are not restricted to
India, the Company is setting up manufacturing
facilities closer to the end-markets in USA and China.
Over the years, the Company has developed control
over technology and built capacities for
manufacturing of all key components of wind turbine
generators; namely, rotor blades, generators,
gearboxes, control systems and towers. This has
enabled the Company to leverage and integrate
component technologies into the total turbine
solution realizing a more reliable, technologically
superior and competitive turbine in the market place
and maintain its strong position in times of severe
supply bottlenecks.
Manufacturing in India
The main manufacturing facilities of the Company are
located at Daman, Pondicherry, Maharashtra and Gujarat
in India. Besides manufacturing WTGs, Suzlon also
manufactures components like rotor blades, generators,
control systems and tubular towers required for WTGs.
The Company enjoys cost advantages over its global
competitors by way of operating its major
manufacturing capacities in India.
Manufacturing in USA, China and Europe
To achieve its aspirations of being a key player in the
Chinese market, and to meet the 70% indigenous
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content criteria set by the local government, the
Company is setting up an integrated manufacturing
facility in Tianjin.
The Company is also establishing a manufacturing
facility in the State of Minnesota, USA to produce
rotor blades.
The Company recently acquired a Belgiam company,
Hansen Transmissions International, which is one of
the three major multi-MW gearbox manufacturers in
the world with its manufacturing facilities in Belgium.
RISKS AND CONCERNS
The key risks and concerns identified and the steps
taken by the Company to mitigate the adverse impact
of the same are listed below:
Supply chain risk
The supply chain bottlenecks faced by global
WTG manufacturers could result in delayed
deliveries of products and services, dissatisfied
customers and even penalties in extreme cases.
The Company, through its vertical integration
strategy, strengthened its supply chain with in-
house manufacturing of the critical components
of the WTG. The Company aims to become a
fully integrated end-to-end solution provider in
the wind energy sector in the years to come.
Regulatory risk, withdrawal of tax incentives
Another threat the Company faces is the
reduction in incentives and increased regulatory
pressures from governments and the regulatory
bodies. This may lead to reduced investment in
the sector affecting the Company’s business
growth. The Company has directed its efforts
towards developing more cost-efficient
turbines, whereby in case of withdrawal of
regulatory support, the investment would still
remain an attractive proposal to its customers.
Competition risk
Emergence of other sources of energy which could
directly compete with the wind energy on cost,
generation efficiency and other such parameters
may pose a risk to the Company. The Company has
continually invested in research and development
to make its products not only cost competitive
but also technologically more advanced.
Further, increased competitive pressure from new
entrants in the wind energy sector could lead to
dilution of the Company’s market share. Through
constant R&D and product development,
geographical diversification combined with
strategic alliances, the Company plans to
minimize this risk.
Apart from the risks related to the industry and
business, the Company also manages risks
relating to operational systems and procedures,
foreign exchange, interest rates and commodity
prices as stated below;
Operations risk
The Company’s increasingly widespread global
operations, though a key growth area, could impact
its operational efficiency and flexibility in dealing
with market dynamics. In order to reduce the
complexities, the company has set up a subsidiary
at Denmark that handles international sales and
marketing and has set up subsidiaries in most of
the countries to which Suzlon exports. All of them
have operational autonomy which facilitates rapid
decision making and responsiveness to the
requirements of customers, enabling Suzlon to
take advantage of local opportunities as soon as
they arise.
Exchange rate risk
The imports of the Company are significant and
are denominated in currencies such as the Euro,
the DKK and the U.S. Dollar. The exports are
denominated in the U.S. Dollar. Additionally,
changes in exchange rates influence the
borrowings denominated in currencies other
than the Rupee. It also impacts the Rupee value
of the loans given by the Company to its foreign
subsidiaries.
From time to time, the Company uses derivative
instruments to hedge its foreign exchange
exposures. The total underlying notional amount
outstanding under a derivative contract as at
March 31, 2006 was EURO 9 million.
Nevertheless, a weakening of the Indian Rupee
against the Euro, the U.S. Dollar and other major
foreign currencies may have an adverse effect
on its profitability and operating results
Conversely, an appreciating Indian Rupee could
mean lower earnings from export.
Interest rate risk
Majority of the Company’s long-term Rupee-
denominated debts and short term debts bear
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interest at floating rates linked with prime
lending rates of the respective lenders as
determined from time to time. Further all its
long-term foreign currency-denominated debts
bear interest at floating rates linked with six-
month U.S. Dollar LIBOR.
The Company uses derivative instruments to
hedge against adverse movements in interest
rates with the objective of reducing the cost of
debt. The total underlying notional amount
covered as of March 31, 2006 under a derivative
contract was USD 2 million. The values of these
instruments are subject to fluctuations in
interest rates.
Commodity price risk
The Company is exposed to market risk with respect
to the prices of raw material and components
used in the manufacture of its products. These
commodities include steel and copper. The costs
of these raw materials and components are subject
to fluctuations based on commodity prices. The
costs of components and various other parts
sourced from outside manufacturers may also
fluctuate based on their availability. In the normal
course of business, the Company purchases these
raw materials and components either pursuant to
supply agreements or through planned purchase
mechanism.
OUTLOOK
The sector in which the Company operates is
demanding attention, and more importantly getting
it. The sector is projected to grow at 21% for the next
five years. We are prepared to participate aggressively
in this opportunity.
The Company has been able to maintain its leadership
position in India for eight consecutive years now, and
is confident of maintaining this in the coming years
too. On the international front, it has successfully
established its international business headquarters in
Denmark and country operations in USA, China and
Australia. It has built a healthy order book in all its
focus markets. It has established itself as a fully
vertically integrated player in the wind sector with
in-house manufacturing of all the key components
and developed competencies to provide end-to-end
wind power solutions. To boost its growth plans for
USA and China, it is establishing manufacturing
facilities in these countries.
We expect the year 2006-07 to be an inflection point for
our business, preparing us for higher growth then on.
We also hope to benefit from our efforts in vertical
integration to ensure that our competitiveness
increases as we take a higher share of the global wind
energy space.
The Company believes that this is just the beginning.
The best is yet to come.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate internal controls for its
business processes across departments to ensure
efficiency of operations, compliance with internal
policies and applicable laws and regulations, protection
of resources and assets and accurate reporting of
financial transactions. The Company’s internal control
system is supplemented by extensive audits by the
Management Audit Team, which reports to the Audit
Committee of the Board. Regular internal audits and
checks ensure that objectives of internal controls are
met effectively. The Audit Committee of the Board
reviews and will continue to review the adequacy and
effectiveness of the internal control systems and suggest
improvements for strengthening them.
DISCUSSION ON FINANCIAL PERFORMANCE
Review of the results of operations
The financial statements have been prepared in
compliance with the requirements of the
Companies Act, 1956, and Generally Accepted
Accounting Principles (GAAP) in India. The
Company’s Management accepts responsibility
for the integrity and objectivity of these
financial statements as well as for various
estimates and judgments used therein. There
are no material departures in adoption of the
prescribed accounting standards. The estimates
and judgments relating to the financial
statements have been made on a prudent and
reasonable basis, in order that the financial
statements reflect in a true and fair manner the
form and substance of the transactions, and
reasonably reflect the Company’s present state
of affairs and profits for the year.
Sales have increased by 97.57% from
Rs. 1,917.50 crore in FY 2004-05 to Rs. 3,788.46
crore in FY 2005-06. The growth is primarily
due to increase in volumes and better sales
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realizations. The volume growth was led by
1250 kW product which registered sale of 735
units. Domestic sales contributed 94% to the
total revenues.
The EBIDTA (Rs 921.77 crore) grew higher by
109.43% against 97.57% growth in sales
revenue.
Profit Before Tax (PBT) increased by 130.01% from
Rs. 392.44 crore (representing 20.47% of Sales)
in 2004-05 to Rs. 902.66 crore (representing
23.83% of Sales) in 2005-06. The percentage
increase in PBT is higher than EBIDTA.
Profit after tax increased by 127.18% from Rs.
361.46 crore (representing 18.85% of Sales) in
2004-05 to Rs. 821.19 crore (representing
21.68% of Sales) in 2005-06.
The Company has provided Rs 104.82 crore
towards performance guarantee for generation
(PGG) of electricity for WTGs. The PGG stipulates
that the WTGS sold by the Company would
generate minimum number of energy units
during the period of guarantee and shortfall in
generation units, if any, would be made good
by the Company. The Company provides for the
present obligation on account of PGG on each
balance sheet date. The provision for PGG has
increased by 111% in 2005-06. The increase is
attributable to increase in volume of business
as well the low wind velocity recorded during
the current financial year.
The employees’ remuneration and benefit cost was
Rs. 62.96 crore. The increase in employees’
remuneration and benefit cost was mainly due to
increase in the number of employees. Employee
remuneration cost includes Rs. 10.36 crore on
account of ESOPs granted during the year, which
did not exist during the previous year.
At 1.44% of sales in FY 2005-06 as against 2.15%
of sales in FY 2004-05, the financial charges
(Rs. 54.56 crore in FY 2005-06 as against Rs.
41.30 crore in FY 2004-05) have reduced primarily
due to temporary infusion of funds raised from
the IPO. A part of the said funds were temporarily
used to reduce working capital borrowings. In
absolute terms, interest cost has increased due
to increase in the level of activity.
The depreciation (Rs.45.87 crore in FY 2005-06
as against Rs 38.97 crore in FY 2004-05) as a %
of sales reduced from 2.03% in 2004-05 to
1.21% in 2005-06. The increase in depreciation
charge during the financial year 2005-06 was
due to addition of fixed assets of Rs.185.28
crore during the year.
Review of financial condition
During the year, the Company offered
29,340,000 equity shares of Rs. 10 each at a
premium of Rs. 500 per share (including an offer
for sale of 2,577,320 equity shares held by
Citicorp International Finance Corporation)
under the Initial Public Offer (IPO). The Company
also issued bonus shares (pre-IPO) in the ratio of
2:1 resulting in addition of 173,845,800 equity
shares of Rs. 10 each and redeemed 1,00,00,000,
0.01% cumulative redeemable preference shares
of Rs. 100 each
The securities premium account increased by
Rs. 1281.17 crore compared to previous year.
There was an addition of Rs. 1,338.13 crore to
securities premium account due to premium on
issue of shares under the IPO. Securities premium
accounts was utilized by Rs. 38.11 crore (net of
tax benefit of Rs. 2.56 crore) towards Share Issue
Expenses and Rs. 18.85 crore have been
capitalized from the account towards issue of
bonus shares. An amount of Rs. 155 crore was
also capitalised from general reserve towards
issue of bonus shares. Out of the profits for the
year Rs. 300 crore have been transferred to
general reserve.
The total Loan Funds increased to Rs. 335.37
crore as on March 31, 2006 from Rs. 322.54
crore as on March 31, 2005. The overall secured
loans have come down by 3.10 % due to
repayment of secured working capital
borrowings through IPO funds.
The gross block increased by Rs. 182.53 crore
during the previous year i.e. from Rs. 217.88
Crore as at March 31, 2005 to Rs. 400.41 crore
as at March 31, 2006.
The major additions are:
Rotor Blade Plant at Dhule, Maharastra
Rotor Blade Plant at Bhuj, Gujarat.
New office premises for Head Office at
Pune, Maharashtra.
New Office premises at Delhi.
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The Investments increased by 132.33% when
compared to the previous year. The increase was
primarily on account of incremental Non-Trade
Investments in Indian as well foreign Subsidiaries.
CAUTIONARY STATEMENT
The Company have included statements in this
Discussion, that contain words or phrases such as
“will”, “aim”, “will likely result”, “believe”, “expect”,
“will continue”, “anticipate”, “estimate”, “intend”,
“plan”, “contemplate”, “seek to”, “future”,
“objective”, “goal”, “project”, “should”, “will pursue”
and similar expressions or variations of such
expressions that are “forward-looking statements”.
All forward-looking statements are subject to
risks,uncertainties and assumptions that could cause
actual results to differ materially from those
contemplated by the relevant forward-looking
statement. Importantfactors that could cause actual
results to differ materially from the Company’s
expectations include, among others:
• Variation in the demand for electricity;
• Changes in the cost of generating electricity
from wind energy and changes in wind patterns;
• Changes in or termination of policies of state
governments in India that encourage investment
in power projects;
• General economic and business conditions in
India and other countries;
• Company’s ability to successfully implement
Company’s strategy, growth and expansion plans
and technological initiatives;
• Changes in the value of the rupee and other
currencies;
• Potential mergers, acquisitions or restructurings
and increased competition;
• Changes in laws and regulations;
• Changes in political conditions;
• Changes in the foreign exchange control
regulations; and
• Changes in the laws and regulations that apply
to the wind energy industry, including tax laws.
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Report on corporate governance
1. CORPORATE GOVERNANCE PHILOSOPHY
Strong corporate governance stands for sound management practices, transparency and disclosure. Itencompasses not only the way in which the Company is being managed and deals with its stakeholders, butalso addresses all aspects of its relationship with society. The Company firmly believes that good corporategovernance stems from the management’s mindset and cannot be regulated by legislation alone. Keepingthis in mind, the Company is fully committed to conduct its affairs in a fair and transparent manner and toenhance shareholder value while complying with the applicable rules and regulations.
We are in compliance with all the requirements of the corporate governance code, enshrined in Clause 49of the listing agreement.
2. BOARD OF DIRECTORS
Composition
The Board of the Company consists of 6 (six) directors as on March 31, 2006, out of which 2 (two) areexecutive directors and 4 (four) are non-executive directors. The Chairman of the Board is an executivedirector and half of the Board is independent. The composition of the Board is in compliance with therequirements of Clause 49 of the listing agreement with the stock exchanges. All the directors have certifiedto us that they are not members of more than 10 (ten) committees and do not act as Chairman of more than5 (five) committees across all the companies in which they are directors.
The composition of the Board of Directors as on March 31, 2006 is as follows:
Name of the Category Total Total no. of Total No. ofdirector no. of membership of the Chairmanship of the
director- committees of Board committees of Boardship Member- Member- Chairman- Chairman-
ship ship ship shipin audit / in other in audit / in otherinvestor committees investor committees
grievance grievancecommittees committees
Mr. Tulsi R. Tanti Chairman & 15 1 1 Nil 1ManagingDirector
Mr. Girish R. Tanti Director 13 1 1 Nil Nil(InternationalBusinessDevelopment& HR)
Mr. Ajay Relan Non-Executive 11 4 Nil Nil Nil(representative Directorof CiticorpInternationalFinance CorporationInc., USA)
Mr. Ashish Dhawan Independent 14 2 3 1 1Director
Mr. Pradip Kumar Independent 13 4 8 1 1Khaitan Director
Mr. V. Raghuraman Independent 3 2 1 Nil NilDirector
Notes:
1. While considering the total number of directorships, directorships in private companies, foreign companies and Section25 companies have also been included.
2. Changes during the year:(i) Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar resigned from the directorship of the Company with effect from July 1,2005. (ii) Mr. V. Raghuraman was appointed as an additional director with effect from October 29, 2005. (iii) Mr. AshishDhawan ceased to be the representative of Chryscapital III, LLC, Mauritius with effect from December 22, 2005 andsubsequently was appointed in his individual capacity as an independent director with effect from December 28, 2005.
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Details of board meeting held during the financial year 2005-06
During the financial year 2005-06, the board of directors of the Company met 6 (six) times on June 24,2005, August 22, 2005, September 8, 2005, October 29, 2005, January 30, 2006 and March 16, 2006.
Attendance at the board meeting and last Annual General Meeting
The attendance of directors at board meetings held in financial year 2005-06 and last Annual GeneralMeeting is as under:
Name of the director No. of board meetings Attendance at the lastattended AGM held on July 28, 2005
Mr. Tulsi R. Tanti 6 YesMr. Girish R. Tanti 6 YesMr. Ajay Relan 4 NoMr. Ashish Dhawan 6 NoMr. Pradip Kumar Khaitan 4 NoMr. V. Raghuraman* 2 N.A.Mr. Vinod R. Tanti** Nil N.A.Mr. Balrajsinh A. Parmar** Nil N.A.
* appointed as an additional director with effect from October 29, 2005.
** resigned from the directorship with effect from July 1, 2005.
Code of Ethics
The Company adopted a code of ethics for its directors and senior management in the financial year2005-06. The Code of Ethics of the Company has been posted on its website www.suzlon.com.
The declaration from the Chairman and Managing Director stating that all the directors and the senior managementof the Company have affirmed compliance with the code of ethics has been included in this report.
Profile of directors seeking appointment / re-appointment
(a) Mr. Tulsi R. Tanti
Mr. Tulsi R. Tanti has over twenty five years of experience in various technical and commercial areas. Hehas been involved in Suzlon’s operations since inception. Mr. Tulsi R. Tanti is a commerce graduate andholds a Diploma-in-Mechanical Engineering. He is also the President of the Gujarat Chapter of IndianWind Turbine Manufacturers Association. He was awarded a Lifetime Achievement Award “Best RenewableMan of the Decade” on March 31, 2006 from the Foundation of Indian Industry and Economists andSolar Energy Society of India (SESI) Pioneer Award for his contribution to the promotion of RenewableEnergy in India. He was also awarded the “World Wind Energy Award 2003” for his extraordinaryachievements in the dissemination of the wind energy in India. He was also awarded the “Champions ofComposites Technologies” award by Composite Centre International for his outstanding contribution inapplication of composite materials and development of composite technology and the “Business LeadershipAward 2002” by SESI. He is also on the board of the following other companies:
Name of the company Name of committee Position held*
Senergy Global Private Limited Nil NilSuzlon Generators Private Limited Nil NilAE-Rotor Techniek B.V. Nil NilSuzlon Energy B.V. (formerly AE-Rotor B.V.) Nil NilSuzlon Energy GmbH Nil NilSuzlon Energy A/S. Nil NilSuzlon Gujarat Wind Park Limited Nil NilSuzlon Structures Private Limited Nil NilSuruchi Holdings Private Limited Nil NilSugati Holdings Private Limited Nil NilSE Drive Technik GmbH Nil NilSuzlon Rotor Corporation Nil NilSuzlon Energy (Tianjin) Limited Nil NilSuzlon Energy Limited, Mauritius Nil Nil
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(b) Mr. Pradip Kumar Khaitan
Mr. Pradip Kumar Khaitan is a B.Com, LL.B., Attorney-at-Law (Bell Chambers Gold Medallist). He is awell-known lawyer and partner of Khaitan & Company, Advocates. He is a member of the Bar Councilof India and Indian Council of Arbitration, New Delhi. His areas of specialisation are commercial andcorporate laws, tax laws, arbitration, joint ventures, mergers and acquisition, restructuring andde-mergers. He is connected with several public charitable institutions as Trustee. He is also on theBoard of the following other companies:
Name of the company Name of committee Position held*
CESC Limited Finance & forex committee Member
Dalmia Cement (Bharat) Limited Nil Nil
Electrosteel Castings Limited Audit committee Member
Graphite India Limited (1) Remuneration committee Chairman(2) Committee for borrowings Member
Hindustan Motors Limited (1) Executive committee Member(2) Investors grievance committee Member(3) Remuneration committee Member
India Glycols Limited Nil Nil
Lanco Industries Limited Nil Nil
OCL India Limited Nil Nil
Pilani Investment & IndustriesCorporation Limited Nil Nil
Woodlands Medical Centre Limited Nil Nil
VISA Steel Limited Remuneration committee Member
South Asian Petrochem Limited Remuneration committee Member
(c) Mr. V. Raghuraman
Mr. V. Raghuraman is a Post Graduate in Chemical Engineering. He is a Senior Advisor (Energy) withConfederation of Indian Industry. He is a specialist in Energy Management and Energy Conservation.He has also served as the chairman of World Energy Efficiency Association, Washington.Mr. V. Raghuraman has also authored several books on Fuel Efficiency in Industrial Practice, CaseStudies on Furnace Oil Utilisation Practices and has also written numerous articles in Journals andPeriodicals. He is also on the Board of the following other companies:
Name of the company Name of committee Position held*
Orissa Sponge Iron & Steel Limited Audit committee Member
Cosmos Carbon Credits Limited Nil Nil
(d) Mr. Ashish Dhawan
Mr. Ashish Dhawan is a MBA with distinction from Harvard University and holds a dual bachelorsdegree (B.S. / B.A.) in applied mathematics and economics from Yale University. He is the co-founderof a private equity fund founded in India that manages funds amounting to approximately $1 billionfor its leading institutional clients. Previously he has also worked in the Proprietary Investment Groupat Goldman Sachs in New York, GP Investments, a private equity fund in Brazil and McCown De Leeuw& Co, a private equity firm in the USA. He was appointed on board of the Company as a nominee ofChryscapital III, LLC on August 10, 2004. He ceased as nominee on December 22, 2005 and wasappointed as an independent director on board of the Company with effect from December 28, 2005.He is also on the board of the following other companies:
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Name of the company Name of committee Position held*
Chrysalis Investment Advisors(India) Private Limited Nil Nil
MphasiS BFL Limited Audit committee Member
Global Vantedge (India) Private Limited Nil Nil
Yes Bank Limited (1) Nominations committee Member(2) Board remuneration committee Chairman
IVRCL Infrastructures & Projects Limited Nil Nil
Chryscapital I, LLC Nil Nil
Chryscapital II, LLC Nil Nil
Chryscapital III, LLC Nil Nil
Chryscapital IV, LLC Nil Nil
Global Vantedge (Mauritius) Nil Nil
CM Investments, LLC Nil Nil
Global Vantedge (Bermuda) Nil Nil
Simplex Infrastructure Limited Nil Nil
*Memberships in various committees include all committees whether mandatory in terms of the listing agreementor otherwise.
3. COMMITTEES OF BOARD
(i) AUDIT COMMITTEE
Terms of reference
The broad terms of reference of the audit committee includes the following as has been mandated inClause 49 of listing agreement and Section 292A of Companies Act, 1956:
(1) Oversight of the Company’s financial reporting process and the disclosure of its financialinformation to ensure that the financial statement is correct, sufficient and credible.
(2) Recommending to the board, the appointment, re-appointment and, if required, the replacementor removal of the statutory auditors and the fixation of audit fees.
(3) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
(4) Reviewing, with the management, the annual financial statements before submission to theBoard for approval, with particular reference to:
(a) Matters required to be included in the directors’ responsibility statement to be included inthe Board’s report in terms of clause 2AA of Section 217 of the Companies Act, 1956,
(b) Changes, if any, in accounting policies and practices and reasons for the same,
(c) Major accounting entries involving estimates based on the exercise of judgement by management,
(d) Significant adjustments made in the financial statements arising out of the audit findings,
(e) Compliance with listing and other legal requirements relating to financial statements,
(f) Disclosure of any related party transactions,
(g) Qualifications in the draft audit report.
(5) Reviewing, with the management, the quarterly financial statements before submission to theBoard for approval.
(6) Reviewing, with the management, performance of statutory, internal auditors and also adequacyof the internal control systems.
(7) Reviewing the adequacy of internal audit function, if any, including the structure of the internalaudit department, staffing and seniority of the official heading the department, reportingstructure, coverage and frequency of internal audit.
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(8) Discussion with internal auditors regarding any significant findings and follow-up thereon.
(9) Review the findings of any internal investigations by the internal auditors into matters wherethere is suspected fraud or irregularity or a failure of internal control systems of a materialnature and reporting the matter to the board.
(10) Discussion with statutory auditors before the audit commences, about the nature and scope ofaudit as well as post-audit discussion to ascertain any area of concern.
(11) To look into the reasons for substantial defaults in the payment to the depositors, debentureholders, shareholders (in case of non-payment of declared dividends) and creditors.
(12) To review the functioning of the Whistle Blower mechanism, in case the same is existing.
The Managing Director, Head - Corporate Finance and the representatives of the statutory auditorswere invited to attend the meetings of the audit committee from time to time.
Composition, meetings and attendance
The audit committee of the Company has been constituted as per the requirements of Clause 49 oflisting agreement. The Chairman of the audit committee is an independent director and all themembers of the audit committee are non-executive directors with majority of them being independentdirectors. During the financial year 2005-06, the audit committee met 5 (five) times on April 30,2005, June 24, 2005, August 22, 2005, October 29, 2005 and January 30, 2006.
The composition of the audit committee as on March 31, 2006 and the attendance of the members inthe meetings held during the financial year 2005-06 are as follows:
Name of the member Chairman / Member No. of meetings attended
Mr. Ashish Dhawan Chairman 5
Mr. Ajay Relan Member 3
Mr. Pradip Kumar Khaitan Member 2
Mr. V. Raghuraman* Member 1
*appointed as an additional director with effect from October 29, 2005
The Company Secretary of the Company acted as the secretary to the audit committee.
(ii) REMUNERATION COMMITTEE
Terms of reference
The terms of reference of the remuneration committee includes determination of the remunerationpayable to the directors of the Company and to approve and administer the Employees Stock OptionPlan of the Company and matters incidental and ancillary thereto.
Composition, meetings and attendance
The remuneration committee of the Company consists of 3 (three) members all of whom areindependent directors. During the financial year 2005-06, the remuneration committee met once onJune 16, 2005 to grant options under Employees Stock Option Plan (ESOP).
The composition of remuneration committee as on March 31, 2006 and the attendance of themembers in the meetings held during the financial year 2005-06 are as follows:
Name of the member Chairman / Member* No. of meetings attended
Mr. Ashish Dhawan Member 1
Mr. Pradip Kumar Khaitan Member 1
Mr. V. Raghuraman** Member Nil
* The Chairman for the remuneration committee would be decided by the committee members from amongstthemselves from time to time.
**appointed as an additional director with effect from October 29, 2005
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Details of remuneration paid to directors during the financial year 2005-06
(a) Remuneration paid / payable to the executive directors for the financial year ended March 31, 2006is given as under:
Name of Salary Super- Bonus / Total Service Noticedirector (Rs.) annuation commission / (Rs.) contract period
(Rs.) stock options
Mr. Tulsi R. 96,41,532 20,02,476 Nil 1,16,44,008 Three years up to ThreeTanti March 31, 2008 months
Mr. Girish R. 33,76,056 7,01,184 Nil 40,77,240 Three years up to ThreeTanti March 31, 2008 months
Mr. Vinod R. 8,44,014 1,75,296 Nil 10,19,310 April 1, 2005 to ThreeTanti* June 30, 2005* months
Mr. Balrajsinh 8,44,014 1,75,296 Nil 10,19,310 April 1, 2005 to ThreeA. Parmar* June 30, 2005* months
* As per the agreement entered into by the Company with Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar,respectively the term of their appointment as wholetime directors was for a period of three years i.e. for the periodfrom April 1, 2005 to March 31, 2008. However, the said Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar resignedfrom the directorship of the Company with effect from July 1, 2005.
(b) Remuneration paid / payable to the non-executive directors for the year ended March 31, 2006 isas under:
The non-executive directors were not paid any remuneration except sitting fees for attending themeetings of the board of directors and / or committees thereof. The details of the sitting fees paid andstock options granted to the non-executive directors are as under:
Name of the non-executive director Sitting fees (Rs.) Stock options Shareholdinggranted in the Company
Mr. Ajay Relan 20,000/- Nil NilMr. Ashish Dhawan 40,000/- Nil NilMr. Pradip Kumar Khaitan 40,000/- Nil NilMr. V. Raghuraman 40,000/- Nil Nil
The Company does not have any material pecuniary relationship or transactions with its non-executivedirectors.
Remuneration policy
Remuneration to executive directors has been decided based on the years of experience and contributionmade by the respective executive directors and is consistent with the existing industry practice. Asregard payment of sitting fees to non-executive directors, the same has been within the limits allowedin terms of the Companies Act, 1956.
(iii) INVESTORS GRIEVANCE COMMITTEE
Terms of reference
The broad terms of reference of the investors grievance committee includes the following:
(a) Redressal of shareholder and investors complaints including but not limiting to transfer ofshares and issue of duplicate share certificates, non-receipt of balance sheet, non-receipt ofdeclared dividends, etc.; and
(b) Monitoring transfers, transmissions, dematerialisation, rematerialisation, splitting andconsolidation of shares issued by the Company.
Composition, meetings and attendance
The investors grievance committee of the Company consists of 3 (three) directors. The Chairman of theinvestors grievance committee is a non-executive director. During the financial year 2005-06, theinvestors grievance committee met 3 (three) times on September 3, 2005, October 19, 2005 andDecember 9, 2005.
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The composition of the investors grievance committee as on March 31, 2006 and the attendance ofthe members in the meetings held during the financial year 2005-06 are as follows:
Name of the member Chairman / Member No. of meetings attended
Mr. Pradip Kumar Khaitan Chairman 3Mr. Tulsi R. Tanti Member 3Mr. Girish R. Tanti Member 3
Name and designation of compliance officer
Mr. Hemal A. Kanuga, Company Secretary is the compliance officer of the Company.
Status of investors’ complaints
The status of investors complaints as on March 31, 2006 is as follows:
Number of complaints as of the date of listing (October 19, 2005) NILNumber of complaints received from the date of listing i.e. October 19, 2005 till March 31, 2006 1048Number of complaints resolved up to March 31, 2006 1044Number of complaints pending as of March 31, 2006 4*
*Complaints pending on March 31, 2006 have since been resolved in April 2006.
The complaints received were mainly in the nature of non-receipt of refund orders, non-receipt ofallotment of shares in the Initial Public Offer (IPO) of the Company, non-receipt of electronic credit,non-receipt of dividend warrants, non-receipt of dividend mandates, etc. None of the complaints werepending for a period of more than one month.
There were no pending requests for transfer of shares of the Company as on March 31, 2006.
(iv) IPO COMMITTEE
Composition, meetings and attendance
The IPO committee of the Company consists of 2 (two) members who are executive directors of theCompany. During the financial year 2005-06, the IPO committee met 6 (six) times on June 24, 2005,July 9, 2005, September 6, 2005, September 12, 2005, October 3, 2005 and October 13, 2005.Composition of IPO committee is as follows:
Name of the member Chairman / Member No. of meetings attended
Mr. Tulsi R. Tanti Chairman 6Mr. Girish R. Tanti Member 6
Terms of reference
The IPO committee of the Company was formed to give effect to the initial public offering of theCompany. The terms of reference inter alia included approval of IPO and offer for sale, appointmentof Registrars, Bankers, Book Running Lead Managers, Co-Book Running Lead Manager(s), approval ofDraft Red Herring Prospectus, Red Herring Prospectus, Prospectus, Fixation of Price Band and Bidopening and closing dates, allotment and listing of shares and to do all other matters relating to initialpublic offering by the Company.
4. ANNUAL GENERAL BODY MEETINGS
The details of last three Annual General Meetings of the Company are as follows:
Financial year Date Time Venue
2002-03 September 30, 2003 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Eighth AGM) Complex, Navrangpura, Ahmedabad – 380 009
2003-04 September 25, 2004 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Ninth AGM) Complex, Navrangpura, Ahmedabad – 380 009
2004-05 July 28, 2005 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Tenth AGM) Complex, Navrangpura, Ahmedabad – 380 009
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Details of special resolutions passed
The details of special resolutions passed in last three Annual General Meetings are as follows:
Financial year Particulars of special resolutions passed
2002-2003 1. Resolution under Section 81(1A) for issuance of redeemable cumulative(Eighth AGM) preference shares for a sum not exceeding Rs. 20,00,00,000 (Rupees
twenty crore only).
2. To increase the authorised share capital from Rs. 25,00,00,000 (Rupeestwenty five crore only) to Rs. 50,00,00,000 (Rupees fifty crore only) andsubsequently alter Clause V of the Memorandum of Association of theCompany due to increase in the authorised share capital.
2003-2004 Adoption of new set of Articles of Association of the Company.(Ninth AGM)
2004-2005 Amendment of Article 190 (a) of the Articles of Association of the Company.(Tenth AGM)
The Company was not required to pass any resolution by means of Postal Ballot during the financial year 2005-06.
No special resolution is proposed to be conducted through postal ballot at the ensuing Annual GeneralMeeting of the Company.
5. DISCLOSURES
(a) Disclosure on materially significant related party transactions
There were no material significant related party transactions during the financial year 2005-06 thatmay have potential conflict with the interest of the Company at large. The details of related partytransactions as per Accounting Standard-18 are included in the notes to the accounts.
(b) Details of non-compliance with regard to capital market
The equity shares of the Company got listed on the National Stock Exchange of India Limited (NSE) andBombay Stock Exchange Limited (BSE) with effect from October 19, 2005. The Company has compliedwith all the requirements of listing agreement as well as the regulations and guidelines prescribed bythe Securities and Exchange Board of India (SEBI). The Company has complied with Clause 38 of thelisting agreement with respect to payment of listing fees to the Exchanges and Annual Custodial Feesto the Depositories for the year 2006-07. There were no penalties imposed nor strictures passed on theCompany by the Stock Exchanges, SEBI or any other statutory authority on any matter related toCapital Markets, during last three years.
(c) Disclosure of accounting treatment
There is no deviation in following the treatments prescribed in any Accounting Standard in preparationof financial statements for the year 2005-06.
(d) Board disclosures- risk management
The Board members of the Company have been appraised about the risk assessment and minimisationprocedures intended to be adopted. The audit committee of the board is also regularly informed about thebusiness risks and the steps taken to mitigate the same. The implementation of the risk assessment andminimisation procedures is under progress and the board members are periodically informed of the status.
(e) Proceeds from public issue
The proceeds of the Initial Public Offer (IPO) of the Company have been utilized for the purposesmentioned in the prospectus only and there is no deviation in the application of these funds.
(f) Certification from CEO and CFO
The requisite certification from the Managing Director and Head - Corporate Finance required to begiven under Clause 49(V) has been placed before the Board of Directors of the Company.
(g) Details of compliance with mandatory requirements and adoption of non-mandatory requirementsof Clause 49 of the listing agreement
The Company has complied with all the mandatory requirements as mandated under Clause 49 oflisting agreement. A certificate from the statutory auditors of the Company to this effect has been
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included in this report. Besides mandatory requirements, the Company has voluntarily constituted aremuneration committee to consider and recommend the remuneration of the directors and approvaland administration of the Employee Stock Option Plan(s) (ESOPs).
(h) Whistle blower policy
The Company does not have a whistle blower policy.
6. MEANS OF COMMUNICATION
(a) Quarterly / Annual results
The quarterly / annual results and notices as required under Clause 41 of the listing agreement arenormally published in the ‘The Economic Times’ / ‘Business Standard’ / ‘The Financial Express’ (English& Gujarati edition, as the case may be).
(b) Posting of information on the website of the Company
The annual / quarterly results of the Company, the official news releases and the presentations madeby the Company to analysts and institutional investors are posted on its website www.suzlon.com.Quarterly results and shareholding pattern are also displayed on EDIFAR website of SEBI for the benefitof public at large.
7. MANAGEMENT DISCUSSION & ANALYSIS REPORT
The management discussion and analysis report forms part of this annual report.
8. GENERAL SHAREHOLDER INFORMATION
(a) Annual General Meeting (proposed) : Eleventh Annual General Meeting
Day and date : Tuesday, July 18, 2006
Time : 11.00 a.m.Venue : Golden Hall
Rajpath Club LimitedSarkhej-Gandhinagar HighwayAhmedabad - 380 059
(b) Financial calendar for 2006-07 (tentative schedule)
Financial year : April 1 to March 31
Board meetings for approval of quarterly results :
Quarter ended on June 30, 2006 : July 2006
Quarter ended on September 30, 2006 : October 2006
Quarter ended on December 31, 2006 : January 2007
Quarter ended on March 31, 2007 : May 2007
Annual results for financial year ended : Within 3 months of the close of financial year.March 31, 2007 (audited)
Annual general meeting for the year 2006-07 : In accordance with Section 166 of CompaniesAct, 1956
(c) Book closure date : July 8, 2006 to July 18, 2006 (both days inclusive)
(d) Dividend payment date : On or before August 17, 2006
(e) Listing on stock exchanges : The equity shares of the Company are listed onthe following stock exchanges in India sinceOctober 19, 2005:
1. National Stock Exchange of IndiaLimited (NSE)“Exchange Plaza”Bandra-Kurla Complex, Bandra (East)Mumbai – 400 051
2. Bombay Stock Exchange Limited (BSE)P.J. Towers, Dalal StreetMumbai – 400 001
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(2) Comparison of the Company’s share price with BSE Sensex
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(f) Stock code
National Stock Exchange of India Limited (NSE) : SUZLON
Bombay Stock Exchange Limited (BSE) : 532667
International Security Identification Number : INE040H01013
(ISIN) for equity shares held in Demat formwith NSDL & CDSL
(g) Market price data
The equity shares of the Company were listed on NSE / BSE with effect from October 19, 2005. Thehigh, low during the each month since October 19, 2005 is given as under:
Stock exchange NSE BSE
Month High Low No. of High Low No. of(Rs.) (Rs.) shares (Rs.) (Rs.) shares
traded traded
October 2005 720.00 580.25 55713843 720.00 565.00 27825333November 2005 887.85 684.80 32896435 889.90 684.30 20737613December 2005 949.80 804.05 28136958 949.70 804.10 15375288January 2006 1,192.00 787.00 14555417 1,188.80 818.00 7359896February 2006 1,162.70 993.25 12740040 1,167.35 995.00 6100287March 2006 1,374.90 1,080.00 17165637 1,367.00 1,092.00 8518892
(h) Performance of the Company in comparison with the broad-based indices
(1) Comparison of the Company’s share price with NSE Nifty
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(3) Comparison of the Company’s share price with BSE capital goods index
(i) Registrar and share transfer agents : M/s. Karvy Computershare Private LimitedKarvy House, 46, Avenue 4Street No.1, Banjara HillsHyderabad - 500 034
Tel. : +91 - 40 - 2332 3031Fax : +91 - 40 - 2330 4703
Email : suzlon.ipo@karvy.comWebsite : www.karvy.com
Contact person:Mr. V.K. Jayaraman, Asst.General Manager &Mr. S. Krishnan, Senior Manager
(j) Share transfer system
The shares of Company are compulsorily traded in dematerialised form. Shares received in physicalform are transferred within a period of 30 days from the date of lodgement subject to documentsbeing valid and complete in all respects. In order to expedite the process of share transfer in line withcorporate governance requirements, the Company has delegated the power of share transfer to R & TAgent M/s. Karvy Computershare Private Limited.
M/s. Karvy Computershare Private Limited, Hyderabad continues as our Registrar & Share Transfer Agent,to whom all communications regarding change of address (if the shares are held in physical form),transfer of shares and change of mandate (if the shares are held in physical form) can be addressed.
(k) Distribution of shareholding
(1) The distribution of shareholding of the Company as on March 31, 2006 is as follows:
Shareholding of No. of % to total Nominal % to totalnominal value shareholders shareholders amount shareholding
of shares held
Up to 5000 76882 99.03 % 17749940 0.62 %5001-10000 246 0.32 % 1851650 0.06 %10001-20000 135 0.17 % 2028540 0.07 %20001-30000 55 0.07 % 1404110 0.05 %30001-40000 36 0.05 % 1287550 0.05 %40001-50000 19 0.02 % 882140 0.03 %50001-100000 53 0.07 % 3784740 0.13 %100001 & above 209 0.27 % 2846325130 98.99 %
Total 77635 100.00 % 2875313800 100.00 %
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(2) Shareholding pattern as on March 31, 2006
The shareholding pattern of the Company as on March 31, 2006 is as follows:
Category No. of shares Percentage
Promoters (including persons acting in concert) 200642400 69.78%Foreign Institutional Investors 63390169 22.05%Non-resident Indians / Overseas Corporate Bodies 1795775 0.62%Mutual funds, Financial Institutions and Banks 1569914 0.55%Private corporate bodies 936397 0.33%Resident Indians 19196725 6.67%
Total 287531380 100.00%
(l) Dematerialization of shares
The equity shares of the Company are compulsorily traded in dematerialized form and are available fortrading under National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL). The International Security Identification Number (ISIN) allotted to the Company underDepository System is INE040H01013.
Number of shares held in dematerialised and physical mode as on March 31, 2006
Particulars No. of shares % of totalcapital issued
Shares held in dematerialized form with NSDL 280008776 97.38%Shares held in dematerialized form with CDSL 5497585 1.91%Shares held in physical form 2025019 0.71%
Total 287531380 100.00%
(m) Outstanding GDRs / ADRs etc:
No GDRs / ADRs / Warrants or Convertible Instruments are outstanding as of the date of this report.
(n) Plant locations
Office locations
101A, 1st & 8th FloorPrestige Towers, No. 100Field Marshal K.M. CarriappaRoad (Residency Road)Bangalore – 560 025
1st Floor, “Neelkanth”1-Bhavani Singh RoadOpp. Nehru Sahkar BhavanC-SchemeJaipur – 302 001
Plot No. 108/4, First & SecondFloor (East Wing)‘Srivari Gokul Towers’Race Course RoadCoimbatore – 641 018
1st Floor, Uma Enclave,Flat No.1B, Road No.9,Hyderabad – 500 034
4th Floor, Kankaria Estate6, Little Russel StreetKolkata – 700 071
412/413, Centre Point,4th Floor, R.C. Dutta RoadAlkapuriVadodara – 390 005
103, Sapphire Twins Building,1st Floor, Office No. 102 & 103Plot No. 16-17A.B. Road, PU-3, Scheme No. 54Indore – 452 008
T.C.15/610(4)Kumari NilayamUdarasiromani RoadThiruvanathpuram – 695 010
206, 2nd FloorThakorbhai Mithaiwala MarketSahara Gate Crossing, Ring RoadSurat – 395 003
1/4, Amrut Commercial CentreSardarnagar Main RoadNear Astron CinemaRajkot – 360 001
“Suzlon”5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009
2nd & 5th FloorGodrej Millennium9 Koregaon Park RoadPune – 411 001
IL & FS Financial Centre6th Floor, East QuadrantPlot No.22, G BlockBandra Kurla Complex,Bandra (East)Mumbai – 400 051
1207, Raheja CentreFree Press Journal MargNariman PointMumbai – 400 021
Unit No. 104 & 106Raheja TowersAnna SalaiChennai – 600 002
Eros Corporate Towers9th Floor, Nehru PlaceNew Delhi – 110 019
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Auditors’ certificateToThe Members of Suzlon Energy Limited
We have examined the compliance of conditions of corporate governance by Suzlon Energy Limited, for the year endedon March 31, 2006, as stipulated in Clause 49 of the listing agreement of the said Company with stock exchanges.
The compliance of conditions of corporate governance is the responsibility of the management. Our examinationwas limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financialstatements of the Company.
In our opinion and to the best of our information and according to the explanations given to us, we certify thatthe Company has complied with the conditions of Corporate Governance as stipulated in the above mentionedlisting agreement.
We further state that such compliance is neither an assurance to the future visibility of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.
SNK & Co. S.R. BATLIBOI & Co.Chartered Accountants Chartered Accountants
per Jasmin B. Shah per Arvind SethiPartner Partner
Membership No: 46238 Membership No: 89802
Place : Pune Place : PuneDate : May 15, 2006 Date : May 15, 2006
For and of behalf of the Board of Directors
Place : New Delhi Tulsi R. TantiDate : May 15, 2006 Chairman & Managing Director
DECLARATION
I, Tulsi R. Tanti, Chairman & Managing Director of Suzlon Energy Limited hereby declare that, as of March 31, 2006, allthe Board Members and Senior Management have affirmed compliance with the Code of Ethics laid down by theCompany.
For Suzlon Energy Limited
Tulsi R. TantiChairman & Managing Director
Factory locations
(o) Address for correspondence
Registered Office“Suzlon”, 5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009
Plot No. 50, 51, 52, 54 & 55Opp. Manjusar GIDCVadodara – 391 775
Survey No. 588PaddarBhuj – 370 105
Plot No H-24 & H-25M.G. Udyognagar Indl. EstateDabhel, Daman – 396 210
Plot No. 306/1 & 3Bhimpore, Nani DamanDaman – 396 210
Survey No.42/ 2 & 3, 54, 1 to 8Bhenslore Road, DunethaDaman – 396 210
Survey No: 282Chhadvel (Korde), SakriDhule – 424 305
Survey No. 574, 59ThiruvandarkoilThribhuvani RoadPondicherry – 605 107
Training centre
2nd & 5th Floor, Business AvenueLane No. 6Koregaon Park RoadPune – 411 001
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SUZLON ENERGY LIMITED
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ToThe Members of Suzlon Energy Limited
1. We have audited the attached balance sheet of Suzlon Energy Limited ('Suzlon' or 'the Company') as at March 31, 2006 and alsothe profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in termsof sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we report that:
(i) We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary forthe purposes of our audit;
(ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;
(iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with thebooks of account;
(iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;
(v) On the basis of the written representations received from the directors, as on March 31, 2006, and taken on record by theboard of directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as adirector in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts givethe information required by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:
(a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;
(b) in the case of the profit and loss account, of the profit for the year ended on that date; and
(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.
SNK & Co. S.R. BATLIBOI & Co.Chartered Accountants Chartered Accountants
per Jasmin B. Shah per Arvind SethiPartner Partner
Membership No: 46238 Membership No: 89802
Place : Pune Place : PuneDate : May 15, 2006 Date : May 15, 2006
Auditors’ report
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Re: Suzlon Energy Limited
1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed
assets.
(b) All fixed assets were physically verified by management in the previous year in accordance with a planned programme
which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed,
no material discrepancies were noticed on such verification.
(c) There was no substantial disposal of fixed assets during the year.
2. (a) The management has conducted physical verification of inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by management are reasonable and adequate in relation to
the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical
verification.
3. (a) The Company has granted unsecured loans to three companies covered in the register maintained under Section 301 of
the Companies Act, 1956. The maximum amount involved during the year was Rs. 194.47 crore and the year end balance
of such loans was Rs. 114.60 crore.
(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and
conditions of such loans are not prima facie prejudicial to the interest of the Company.
(c) In respect of loans granted, repayment of principal and interest, where stipulated have been regular. In cases where the
loans granted are repayable on demand, the repayment is within the date demanded.
(d) Based on the information and explanations provided by the management and our comments in clause 3(c) above, there
is no overdue amount more than rupees one lakh of loans, granted to companies, firms or other parties listed in the
register maintained under Section 301 of the Companies Act, 1956.
(e) As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties
covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly clauses 4(iii) (e), (f) and
(g) are not applicable.
4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system
commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and
for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control
system in respect of these areas.
5. (a) According to the information and explanations provided by management, we are of the opinion that the particulars of
contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under
Section 301 have been so entered.
(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such
contracts or arrangements for sale of wind turbine generators exceeding value of rupees five lakhs entered into during the
financial year are made at prices which are reasonable having regard to the prevailing market prices at the relevant time.
However, in respect of other transactions made in pursuance of such contracts or arrangements, exceeding value of rupees
five lakhs, entered into during the financial year, due to the specialised and unique nature of the transactions and absence
of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the
relevant time.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business.
8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central
Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion
that prima facie, the prescribed accounts and records have been made and maintained in respect of generation of electricity
from wind power. We have not, however, made a detailed examination of the records with a view to determining whether they
are accurate or complete.
Annexure referred to in paragraph 3 of our report of even date
SUZLON ENERGY LIMITED
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9. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customsduty, excise duty, cess and other material statutory dues applicable to it.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund,investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customsduty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more thansix months from the date they became payable.
(c) According to the information and explanations given to us, there are no dues of income-tax, sales-tax, wealth-tax, servicetax, customs duty, excise duty and cess which have not been deposited on account of any dispute.
10. The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current andimmediately preceding financial year.
11. Based on our audit procedures, and as per the information and explanations given by the management and relevant confirmationsfrom applicable banks and financial institutions, we are of the opinion that the Company has not defaulted in repayment ofdues to a financial institution or a bank. The Company did not have any debentures outstanding during the year.
12. According to the information and explanations given to us and based on the documents and records produced to us, theCompany has not granted loans and advances on the basis of security by way of pledge of shares, debentures and othersecurities.
13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii)of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.
14. In our opinion, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, theprovisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.
15. According to the information and explanations given to us, the Company has given guarantee for loans taken by others frombanks or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interestsof the Company.
16. In our opinion and according to the information and explanations given to us, on an overall basis, the term loans have beenapplied for the purposes for which they were obtained.
17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company,we report that no funds raised on short-term basis have been used for long-term investment.
18. The Company has not made any preferential allotment of shares to parties or companies covered in the register maintainedunder Section 301 of the Companies Act, 1956.
19. The Company did not have any outstanding debentures during the year.
20. We have verified the end use of money raised by public issue is as disclosed in the notes to the financial statements.
21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements andas per the information and explanations given by the management, we report that no fraud on or by the Company has beennoticed or reported during the course of our audit.
SNK & Co. S.R. BATLIBOI & Co.Chartered Accountants Chartered Accountants
per Jasmin B. Shah per Arvind SethiPartner Partner
Membership No: 46238 Membership No: 89802
Place : Pune Place : PuneDate : May 15, 2006 Date : May 15, 2006
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Balance sheet as at March 31, 2006All amounts in rupees crore unless otherwise stated
Particulars Schedule As at March 31,
2006 2005
SOURCES OF FUNDS
Shareholders' funds
Share capital A 302.53 201.92Employee stock options B 10.36 –Reserves and surplus C 2,509.36 727.65
2,822.25 929.57
Loan funds
Secured loans D 276.61 285.46Unsecured loans E 58.76 37.08
335.37 322.54
3,157.62 1,252.11APPLICATION OF FUNDS
Fixed assets F
Gross block 400.41 217.88Less: Depreciation 104.73 57.61
Net block 295.68 160.27Capital work-in-progress 76.25 17.93
371.93 178.20
Investments G 292.74 126.00
Deferred tax asset, net (See Schedule - O, Note 6) 58.00 27.61
Current assets, loans and advances H
Inventories 1,104.49 494.58Sundry debtors 1,583.91 676.33Cash and bank balances 316.24 88.20Loans and advances 691.13 375.98
3,695.77 1,635.09
Less: Current liabilities and provisions I
Current liabilities 858.32 529.19Provisions 402.50 185.60
1,260.82 714.79
Net Current assets 2,434.95 920.30
3,157.62 1,252.11
Significant accounting policies and notes to accounts O
The schedules referred to above and notes to accounts form an integral part of the balance sheet.
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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Profit and loss account for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated
Particulars Schedule Year ended March 31,
2006 2005
INCOME
Sales 3,788.46 1,917.50Other income J 69.28 23.26
3,857.74 1,940.76
EXPENDITURE
Cost of goods sold K 2,282.21 1,141.45Operating and other expenses L 509.48 291.22
Employees' remuneration and benefits M 62.96 35.32Financial charges N 54.56 41.30Depreciation F 45.87 38.97Preliminary expenses written off – 0.06
2,955.08 1,548.32
PROFIT BEFORE TAX 902.66 392.44
Current tax 107.00 48.00Deferred tax (27.97) (17.08)Fringe benefit tax 2.40 –Earlier year 0.04 0.06
NET PROFIT 821.19 361.46
Balance brought forward 526.95 306.63
PROFIT AVAILABLE FOR APPROPRIATIONS 1,348.14 668.09
Interim dividend on equity shares 71.88 23.18Proposed dividend on equity shares 71.88 11.59Dividend on preference shares 1.51 1.51Tax on dividends 20.38 4.86Transfer to general reserve 300.00 100.00
Surplus carried to balance sheet 882.49 526.95
Earnings per share (in Rs.)Basic [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 29.99 14.21(See Schedule - O, Note 7)Diluted [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 29.94 14.21(See Schedule - O, Note 7)
Significant accounting policies and notes to accounts O
The schedules referred to above and notes to accounts form an integral part of the profit and loss account.
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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SUZLON ENERGY LIMITED
Cash flow statement for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated
Particulars Year ended March 31,
2006 2005
CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 902.66 392.44
Adjustments forDepreciation 45.87 38.97Loss on sale of fixed assets 0.44 0.44(Profit) / Loss on sale of investments – 10.09Interest income (33.32) (20.56)Interest expense 42.52 31.93Dividend income (3.09) (2.02)Provision for operation, maintenance and warranty 117.93 69.36Provision for power generation guarantee 104.82 49.62(Reversal) / Provision for doubtful debts and advances (5.39) 8.93Employee stock option scheme 10.36 –Preliminary expenses written off – 0.06Wealth-tax 0.02 0.01
Operating profit before working capital changes 1,182.82 579.27Movements in working capital(Increase) / Decrease in sundry debtors (902.84) (368.62)(Increase) / Decrease in inventories (609.91) (292.87)(Increase) / Decrease in loans and advances (197.57) (25.93)Increase / (Decrease) in current liabilities 260.50 213.17Cash (used in) generated from operations (267.00) 105.02Direct taxes paid (122.78) (41.79)
Net cash (used in) / generated from operating activities (389.78) 63.23CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets (240.41) (70.28)Proceeds from sale of fixed assets 0.38 0.42Purchase of investments (170.89) (85.38)Inter-corporate deposits repaid / (granted) 3.18 (135.52)Sale of investments 4.15 2.60(Loans granted to) / Repayments received from subsidiaries (106.26) 14.94Interest received 26.80 20.46Dividends received 2.64 0.08
Net cash used in investing activities (480.41) (252.68)CASH FLOW FROM FINANCING ACTIVITIES
Redemption of preference share capital (100.00) –Proceeds from issuance of share capital including premium 1,364.89 200.00Share issue expenses (40.67) (7.57)Proceeds from borrowings 263.49 171.13Repayment of borrowings (250.65) (69.25)Interest paid (41.92) (31.44)Dividends paid (84.99) (40.32)Tax on dividends paid (11.92) (5.27)
Net cash from financing activities 1,098.23 217.29NET INCREASE IN CASH AND CASH EQUIVALENTS 228.04 27.84Cash and cash equivalents at the beginning of the year 88.20 60.36Cash and cash equivalents at the end of the year 316.24 88.20Components of cash and cash equivalents
Cash and cheques on hand 0.31 0.20With scheduled banks
in current account 17.57 18.29in term deposit accounts [See Schedule - O, Note 14(i)] 298.26 69.70
With non-scheduled banks in current account 0.10 0.01316.24 88.20
Notes:1. Purchase of fixed assets includes payments for items in capital work-in-progress and advances for purchase of fixed assets.2. Previous year's figures have been regrouped/reclassified, wherever necessary.
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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Schedules to the balance sheet as at March 31, 2006
Particulars As at March 31,
2006 2005
SCHEDULE - A : SHARE CAPITAL
Authorised
330,000,000 (101,000,000) equity shares of Rs. 10 each 330.00 101.00
11,500,000 (11,500,000) preference shares of Rs. 100 each 115.00 115.00
445.00 216.00
Issued, Subscribed
Equity
287,531,380 (86,922,900) equity shares of Rs. 10 each fully paid up 287.53 86.92[Of the above equity shares, 251,855,300 (78,009,500) shares were allottedas fully paid bonus shares by utilisation of Rs. 174.04 crore (Rs. 19.04 crore)from general reserve, Rs. 1.03 crore (Rs. 1.03 crore) from capital redemptionreserve and Rs. 76.80 crore (Rs. 57.95 crore) from securities premium account]
Preference
1,500,000 (1,500,000), 10% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - O, Note 3(a)] 15.00 15.00
Nil (10,000,000), 0.01% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - O, Note 3(b)] – 100.00
302.53 201.92
SCHEDULE - B : EMPLOYEE STOCK OPTIONS
Employee stock options outstanding 22.44 –Less:Deferred employee compensation expense outstanding 12.08 –
10.36 –
SCHEDULE - C : RESERVES AND SURPLUS
Securities premium account
As per last balance sheet 29.85 –Add: Addition during the year 1,338.13 95.37
Less:Capitalisation by way of issue of bonus shares 18.85 57.95Share issue expenses [net of tax benefit Rs. 2.56 crore (Rs. Nil)] 38.11 7.57
1,311.02 29.85
General reserve
As per last balance sheet 170.85 70.85
Add: Transfer from profit and loss account 300.00 100.00
470.85 170.85
Less: Capitalisation by way of issue of bonus shares 155.00 –
315.85 170.85Profit and loss account 882.49 526.95
2,509.36 727.65
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SUZLON ENERGY LIMITED
Particulars As at March 31,
2006 2005
SCHEDULE - D : SECURED LOANS
Term loans
From banks 25.28 15.38
(Various loans secured by a first charge on certain immovable and/or movablefixed assets, second charge on current assets and/or personal guarantees ofdirectors in certain cases.)
From others 137.31 53.12
(Secured by a first charge on certain immovable and movable fixed assets,specific security deposits, book-debts, second charge on current assets andpersonal guarantees of directors in certain cases.)
162.59 68.50
Working capital facilities from banks and financial institutions
Rupee loans 114.02 202.85
Foreign currency loans – 13.09
(Secured by hypothecation of inventories, book-debts and other currentassets of the Company, both present and future, first charge on certainimmovable fixed assets, second charge on all other immovable fixed assetsand personal guarantees of directors in certain cases.)
114.02 215.94
Vehicle loans – 1.02
(Vehicle loans are hypothecated against the respective vehicle's financed.)
276.61 285.46
SCHEDULE - E : UNSECURED LOANS
Long term
From other than banks 29.34 37.08[Due within one year Rs. 23.04 crore, (Rs. 8.37 crore)]
29.34 37.08Short term
From other than banks 29.42 –
29.42 –
58.76 37.08
Schedules to the balance sheet as at March 31, 2006
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No
tes:
1.
Dep
reci
atio
n ch
arg
e fo
r th
e cu
rren
t ye
ar a
mou
ntin
g t
o Rs
. 49
.04
cror
e (R
s. 3
9.76
cro
re),
is
incl
udin
g R
s. 3
.17
cror
e (R
s. 0
.80
cror
e) w
hich
has
bee
n ca
pit
alis
ed a
s p
art
of s
elf
man
ufac
ture
das
sets
.
The
dep
reci
atio
n ch
arg
ed i
n th
e Pr
ofit
and
Los
s A
ccou
nt a
mou
ntin
g t
o Rs
. 45
.87
cror
e (R
s. 3
8.97
cro
re)
is n
et o
f th
e am
ount
cap
ital
ised
.
2.
Bala
nce
of b
uild
ing
s in
clud
es R
s. 6
.96
cror
e (R
s. 1
.08
cror
e) f
or w
hich
the
tra
nsfe
r of
pro
per
ty in
the
nam
e of
the
com
pan
y is
pen
din
g;
and
Rs.
1.5
1 cr
ore
(Rs.
Nil)
whi
ch a
re h
eld
for
dis
pos
alan
d s
tate
d a
t lo
wer
of
thei
r ne
t b
ook
valu
e an
d e
stim
ated
net
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lisab
le v
alue
.
3.
An
amou
nt o
f Rs
. 0.
35 c
rore
(Rs
. 0.
22 c
rore
) to
war
ds
chan
ge
in r
upee
lia
bili
ty c
onse
que
nt t
o th
e re
alig
nmen
t of
rup
ee v
alue
in
term
s of
for
eig
n cu
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alue
s ha
s b
een
adju
sted
to
the
cost
of
fixe
d a
sset
s /
cap
ital
wor
k-in
-pro
gre
ss,
as r
equi
red
by
Sche
dul
e V
I to
the
Com
pan
ies
Act
, 19
56.
Sche
dule
s to
the
bal
ance
she
et a
s at
Mar
ch 3
1, 2
006
SCH
EDU
LE -
F :
FIX
ED A
SSET
S
Ass
ets
Gro
ss b
lock
Dep
reci
atio
nN
et b
lock
As
atA
dd
itio
ns
Ded
uct
ion
sA
s at
As
atA
dd
itio
ns
Ded
uct
ion
sA
s at
As
atA
s at
Ap
ril
1,M
arch
31,
Ap
ril
1,M
arch
31,
Mar
ch 3
1,M
arch
31,
2005
2006
2005
2006
2006
2005
Free
hold
land
9.72
6.54
–16
.26
––
––
16.2
69.
72
Leas
ehol
d la
nd0.
96–
–0.
960.
060.
01–
0.07
0.89
0.90
Build
ings
72.5
058
.34
0.03
130.
8111
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6.47
–17
.67
113.
1461
.30
Plan
t and
mac
hine
ry81
.21
69.2
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5314
9.97
26.0
624
.08
0.19
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0.02
55.1
5
Win
d re
sear
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easu
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230.
9413
.26
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3.21
0.82
7.28
5.98
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Com
pute
rs a
nd o
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uipm
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17.2
610
.86
0.58
27.5
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254.
680.
5310
.40
17.1
411
.01
Furn
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and
fixt
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9.10
6.06
–15
.16
3.78
1.60
–5.
389.
785.
32
Vehi
cles
4.32
2.02
0.67
5.67
1.95
0.77
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2.34
3.33
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ngib
le a
sset
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2824
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–32
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6.17
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soft
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7.97
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1.66
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005.
25
217.
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5.28
2.75
400.
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41.
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0.27
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tal w
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in-p
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76.2
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217.
8818
5.28
2.75
400.
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4.73
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9317
8.20
Prev
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yea
r15
9.09
66.8
28.
0321
7.88
23.7
739
.76
5.92
57.6
116
0.27
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SUZLON ENERGY LIMITED
Particulars As at March 31,
2006 2005
SCHEDULE - G : INVESTMENTS
LONG TERM INVESTMENTS (At cost, fully paid)
UNQUOTED
(i) Government and other securities (Non-trade)
Security deposited with government departments* 0.01 0.01
0.01 0.01
(ii) Trade Investments
Nil (65,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Infrastructure Limited (formerly Suzlon Developers Limited) – 0.65
99,999 (99,999), 13% cumulative redeemable preference shares of Rs. 100each of Sarjan Realities Limited 1.00 1.00
500,000 (500,000), 10% cumulative redeemable preference shares of Rs. 100each of Suzlon Infrastructure Limited (formerly Suzlon Developers Limited) 5.00 5.00
6.00 6.65
(iii) Other than trade investments
(a) Subsidiaries
Indian
4,990,000 (4,990,000) equity shares of Rs.10 each of Suzlon Towers andStructures Limited (formerly Suzlon Green Power Limited) 5.29 5.29
13,000,000 (2,000,000) equity shares of Rs.10 each of Suzlon WindfarmServices Limited 18.26 7.24
11,249,500 (11,249,500) equity shares of Rs.10 each of Suzlon StructuresPrivate Limited 11.25 11.25
8,721,500 (8,721,500) equity shares of Rs.10 each of Suzlon GeneratorsPrivate Limited 8.72 8.72
Nil (350,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Windfarm Services Limited – 3.50
900,000 (900,000), 10% cumulative redeemable preference shares ofRs. 100 each of Suzlon Windfarm Services Limited 9.00 9.00
750,000 (89,100), 8% cumulative redeemable preference shares of Rs. 100each of Suzlon Structures Private Limited 7.50 0.89
451,000 (451,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Towers and Structures Limited (formerly Suzlon GreenPower Limited) 4.51 4.51
2,000,000 (Nil) equity shares of Rs. 10 each of Suzlon Gujarat Wind ParkLimited 2.00 –
3,010,000 (Nil) equity shares of Rs. 10 each of Suzlon Power InfrastructurePrivate Limited 3.01 –
1,500,000 (Nil) equity shares of Rs. 10 each of Suzlon Engitech PrivateLimited 1.50 –
Schedules to the balance sheet as at March 31, 2006
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Particulars As at March 31,
2006 2005
SCHEDULE - G : INVESTMENTS (Contd.)
Overseas
244,000 (172,500) equity shares of 10 Euro each fully paid up of AE RotorHolding BV, The Netherlands 13.15 9.35
1,422,137 (413,864) equity shares of 100 DKK each fully paid up of SuzlonEnergy A/S, Denmark [DKK 36,400,350 (DKK 26,977,650) invested as additionalpaid in capital] 133.06 52.74
1,000 (Nil) equity shares of 1 USD each fully paid up of Suzlon Rotor Corporation,USA [USD 6,349,000 (USD Nil) invested as additional paid in capital] 28.24 –
Suzlon Energy (Tianjin) Limited, China 24.39 –
1 (Nil) equity share of 25,000 Euro each fully paid up of Suzlon WindparkManagement GmbH, Germany [Euro 5,000 (Euro Nil) paid as capital reserve] 0.16 –
1 (Nil) equity share of 25,000 Euro each fully paid up of SE Drive TechniekGmbH, Germany [Euro 350,000 (Euro Nil) paid as capital reserve] 2.01 –
2 (2) equity shares of 12,500 Euro each fully paid up of Suzlon Energy GmbH,Germany [Euro 2,486,000 (Euro 1,025,000) paid as capital reserve] 13.61 5.78
285.66 118.27(b) Other than subsidiaries
202,900 (202,900) equity shares of Rs. 10 each of Suzlon Hotels Limited 0.20 0.20
87,000 (87,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Hotels Limited 0.87 0.87
2,550 (2,550) equity shares of Rs. 10 each of Saraswat Co-operative Bank Ltd.* 0.00 0.00
1.07 1.07
Total Unquoted 292.74 126.00
Investments 292.74 126.00
(*Amount below Rs. 0.01 crore)
Aggregate cost of unquoted investments 292.74 126.00
Schedules to the balance sheet as at March 31, 2006
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Schedules to the balance sheet as at March 31, 2006
Particulars As at March 31,
2006 2005
SCHEDULE - H : CURRENT ASSETS, LOANS AND ADVANCES
Current assets
Inventories
Raw materials [Including goods-in-transit Rs. 182.26 crore (Rs. 106.30 crore)] 914.58 415.27Semi-finished goods and work-in-progress 150.51 68.86Land and land lease rights 39.40 10.45
1,104.49 494.58
Sundry debtors(Unsecured)
Outstanding for a period exceeding six monthsconsidered good [See Schedule - O, Note 10(f)] 173.40 93.87considered doubtful 5.25 9.99
178.65 103.86
Others, considered good 1,410.51 582.46
1,589.16 686.32
Less: Provision for doubtful debts 5.25 9.99
1,583.91 676.33
Cash and bank balances
Cash on hand 0.31 0.20Balances with scheduled banks
in current accounts 17.57 18.29in term deposit accounts [See Schedule - O, Note 14(i)] 298.26 69.70
315.83 87.99
Balance with non-scheduled bank in current account 0.10 0.01[Maximum balance during the year Rs. 0.90 crore (Rs. 0.12 crore)]
316.24 88.20
Loans and advances(Unsecured and considered good, except otherwise stated)
Loans to subsidiaries (in foreign currency) 44.53 26.62Loans to subsidiaries (in Indian rupees) 117.61 29.26Deposits
with customers as security deposit 31.33 31.94others 71.41 12.08
Advance against taxes 6.88 –[Net of provisions of Rs. 157.48 crore (Rs. 61.00 crore)]
Advances recoverable in cash or in kind or for value to be received*considered good 419.37 276.08considered doubtful 2.70 3.35
422.07 279.43
Less: Provision for doubtful loans and advances 2.70 3.35
419.37 276.08
691.13 375.98
3,695.77 1,635.09
* Includes(a) Rs. Nil** (Rs. 3.89 crore) towards share application money pending allotment(b) Inter corporate deposits of Rs. 185.45 crore (Rs. 188.64 crore)
** Amount below Rs. 0.01 crore
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Schedules to the balance sheet as at March 31, 2006
Particulars As at March 31,
2006 2005
SCHEDULE - I : CURRENT LIABILITIES AND PROVISIONS
Current Liabilities
Sundry creditors 535.67 418.19
Acceptances 22.59 61.46
Subsidiaries 29.99 11.15
Other current liabilities 199.64 29.36
Interest accrued but not due 1.36 0.76
Advances from customers 69.07 8.27
858.32 529.19
Provisions
Wealth-tax 0.02 0.01
Income-tax – 6.58
[Net of advance tax of Rs. 164.36 crore (Rs. 54.42 crore)]
Gratuity, superannuation and leave encashment 1.11 0.90
Generation guarantee, LD, operation, maintenance and warranty 317.69 163.17
Dividend 73.39 13.10
Tax on dividend 10.29 1.84
402.50 185.60
1,260.82 714.79
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Particulars Year ended March 31,
2006 2005
SCHEDULE - J : OTHER INCOME
Interest received
From banks 15.86 3.20
From others 17.46 17.36[Including interest on non-trade investment Rs. Nil (Rs. 0.06 crore)]
Dividend[including from subsidiaries Rs. 2.67 crore (Rs. 1.68 crore)] 3.09 2.02
Excess provisions written back – 0.30
Income from infrastructure development [See Schedule - O, Note 10(e)] 26.96 –
Miscellaneous income 5.91 0.38
69.28 23.26
SCHEDULE - K : COST OF GOODS SOLD
Consumption of raw materials
Opening stock 415.27 170.33
Add: Purchases 2,779.01 1,424.72
3,194.28 1,595.05
Less: Closing stock 914.58 415.27
(A) 2,279.70 1,179.78
Trading purchases (B) 113.11 9.61
(Increase) / Decrease in stocks
Opening balance
Semi finished goods and work-in-progress 68.86 16.17Finished goods – 14.12Land and land lease rights 10.45 1.08
(C) 79.31 31.37
Closing balance
Semi finished goods and work-in-progress 150.51 68.86Land and land lease rights 39.40 10.45
(D) 189.91 79.31
(Increase)/Decrease in stocks (E) = (C) - (D) (110.60) (47.94)
(A) + (B) + (E) 2,282.21 1,141.45
Schedules to the profit and loss account for theyear ended March 31, 2006
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Particulars Year ended March 31,
2006 2005
SCHEDULE - L : OPERATING AND OTHER EXPENSES
Stores and spares 13.45 6.54Power and fuel 1.77 1.12Factory expenses 5.36 2.57Repairs and maintenance:
Plant and machinery 1.44 0.43Building 1.81 1.47Others 2.90 1.52
Operation and maintenance charges 11.73 7.23Design change and technological upgradation charges 20.91 9.14Operating lease charges 2.37 2.35Rent 5.46 3.49Rates and taxes 4.79 0.38Provision for operation, maintenance and warranty 117.93 69.36Provision for power generation guarantee 104.82 49.62Quality assurance expenses 22.71 11.14R & D, certification and product development 7.81 3.76Insurance 4.30 2.81Advertisement and sales promotion 15.45 5.59Infrastructure development expenses – 12.87Freight outward and packing expenses 82.02 24.57Sales commission 23.25 9.78Travelling, conveyance and vehicle expenses 17.93 11.10Communication expenses 2.88 2.10Auditors' remuneration and expenses 2.25 1.22Consultancy charges 7.89 6.11Charity and donations 2.06 5.17Other selling and administrative expenses 24.55 18.53Exchange differences, net 1.20 1.79Provision for doubtful debts and advances – 8.93Loss on sale of investments, net – 10.09Loss on assets sold / discarded, net 0.44 0.44
509.48 291.22
SCHEDULE - M : EMPLOYEES' REMUNERATION AND BENEFITS
Salaries, wages, allowances and bonus 57.70 30.33
Contribution to provident and other funds 2.94 1.81
Staff welfare expenses 2.32 3.18
62.96 35.32
SCHEDULE - N : FINANCIAL CHARGES
Interest
Fixed loans 6.09 8.74
Others 36.43 23.19
Bank charges 12.04 9.37
54.56 41.30
Schedules to the profit and loss account for theyear ended March 31, 2006
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SUZLON ENERGY LIMITED
SCHEDULE - O : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS(All amounts in rupees crore unless otherwise stated)
Nature of operations
The Company is engaged in the manufacture of Wind Turbine Generators (WTG) of various capacities and its components. It hasmanufacturing plants at Daman, Pondicherry, Bhuj, Chhadvel (Dhule) and Vadodara.
1. Significant accounting policies
(a) Basis of accounting
The financial statements have been prepared on the historical cost convention to comply in all material respects, withthe mandatory accounting standards issued by The Institute of Chartered Accountants of India (ICAI), generallyaccepted accounting principles, and provisions of Companies Act, 1956 (the Act) following mercantile system ofaccounting as adopted consistently by the Company. Accounting policies not referred to otherwise, are consistentwith generally accepted accounting principles.
(b) Use of estimates
The presentation of financial statements in conformity with the generally accepted accounting principles requiresestimates and assumptions to be made that may affect the reported amount of assets and liabilities and disclosuresrelating to contingent liabilities as at the date of the financial statements and the reported amount of revenues andexpenses during the reporting period. Actual results could differ from those estimated.
(c) Revenue recognition
Sale of goods
Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods aretransferred to the customer, as per the terms of the respective sales order. Sales are recorded net of taxes.
Interest
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rateapplicable. In case of interest charged to customers, interest is accounted for on availability of documentary evidencethat the customer has accepted the liability.
Dividend
Dividend income from investments is recognised when the right to receive payment is established. Dividend fromsubsidiary companies declared after the year end, is accounted during the year as required by Schedule VI to theCompanies Act, 1956.
(d) Fixed assets and intangible assets
Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost includes all expenditurenecessary to bring the asset to its working condition for its intended use. Own manufactured assets are capitalisedinclusive of all direct costs and attributable overheads. Capital work-in-progress comprises of advances paid to acquirefixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date. In thecase of new undertaking, pre-operative expenses are capitalised upon the commencement of commercial production.
Intangible assets are recorded at the consideration paid for their acquisition. Cost of an internally generated assetcomprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating,producing and making the asset ready for its intended use.
The carrying amounts of the assets belonging to each Cash Generating Unit (CGU) are reviewed at each Balance Sheetdate to assess whether they are recorded in excess of their recoverable amounts, and where carrying amounts exceedthe recoverable amount of the assets' CGU, assets are written down to their recoverable amount. Further, assets heldfor disposal are stated at the lower of the net book value or the estimated net realisable value.
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(e) Depreciation/Amortisation
Depreciation / Amortisation is provided on the Written Down Value (WDV) method unless otherwise mentioned, pro-
rata to the period of use of assets and is based on management's estimate of useful lives of the fixed assets or at rates
specified in Schedule XIV to the Act, whichever is higher.
Type of asset Rate
Leasehold land Amortised over the period of lease
Office building 5%
Factory building 10%
Plant and machinery 13.91%
Moulds 13.91% or useful life based on usage
Patterns 30% or useful life based on usage
Plugs for moulds 50% or useful life based on usage
Wind research and measuring equipment 50%
Computers and software 40%
Office equipment 13.91%
Furniture and fixture 18.10%
Motor car and others 25.89%
Trailers 30%
Intangible assets Amortised on a straight line basis over a period of five years
(f) Inventories
Inventories of raw materials including stores, spares and consumables, packing materials, work-in-progress, semi-
finished goods and finished goods are valued at the lower of the cost and estimated net realisable value. Cost is
determined on weighted average basis.
The cost of work-in-progress, semi-finished goods and finished goods includes the cost of material, labour and
manufacturing overheads.
Stock of land and land lease rights is valued at lower of cost and estimated net realisable value. Cost is determined
based on the weighted average basis. Net realisable value is determined by management using technical estimates.
(g) Investments
Long term investments are carried at cost. However, provision is made to recognise a decline, other than temporary, in
the value of long term investments.
Current investments are carried at lower of cost and fair value, determined on an individual basis.
(h) Foreign currency transactions
Transactions in foreign currencies are normally recorded at the average exchange rate prevailing in the month during
which the transaction occurred.
Outstanding balances of foreign currency monetary items are reported using the period end rates.
Non-monetary items carried in terms of historical cost denominated in a foreign currency are reported using the
exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the exchange rate that existed, when the values were
determined.
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Exchange differences arising as a result of the above are recognised as income or expense in the profit and loss
account, except in case of liabilities incurred for acquiring imported fixed assets, where the differences are adjusted
to the carrying amount of such fixed assets in compliance with the Schedule VI of the Act.
In case of forward contracts, the difference between the forward rate and the exchange rate, being the premium or
discount, at the inception of a forward exchange contract is recognised as income or expense over the life of the
contract. Exchange differences on such contracts are recognised in the profit and loss account in the reporting period
in which the rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is
recognised as income or as expense for the period.
Foreign operations
The financial statements of integral foreign operations are translated as if the transactions of the foreign operations
have been those of the Company itself.
(i) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are
capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time
to get ready for intended use. All other borrowing costs are charged to revenue.
(j) Retirement and other employee benefits
Defined contributions to provident fund and family pension fund are charged to the profit and loss account on accrual basis.
Liabilities with regard to gratuity are determined under Group Gratuity Scheme with Life Insurance Corporation of
India (LIC) and the provision required is determined as per actuarial valuation carried out by LIC, as at the balance sheet
date.
Contributions to superannuation fund with LIC through its employees' trust are charged to the profit and loss account
on an accrual basis.
The Company makes a provision in its books for unutilised leave lying to the credit of employees, subject to the
maximum period of leave, based on actuarial valuation as at the balance sheet date.
(k) Provisions, contingent liabilities and contingent assets
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that
an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
Provisions are not discounted to their present value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
Contingent liabilities are disclosed by way of notes to the accounts.
Contingent assets are not recognised.
(l) Income tax
Tax expense for a year comprises of current tax, deferred tax and fringe benefit tax. Current tax is measured after taking
into consideration, the deductions and exemptions admissible under the provisions of the Income tax Act, 1961.
Deferred tax reflects the impact of current year timing differences between taxable income and accounting income
for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the
tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the
extent that there is reasonable certainty that sufficient future taxable income will be available against which such
deferred tax assets can be realised.
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Deferred tax resulting from timing differences which originate during the tax holiday period but are expected toreverse after tax holiday period is recognised in the year in which the timing differences originate using the tax ratesand laws enacted or substantively enacted by the balance sheet date.
(m) Lease assets
Operating leases
Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating lease. Lease rentals are charged off to the profit and loss account as incurred.
Initial direct costs in respect of assets given on lease are expensed off in the year in which such costs are incurred.
(n) Earnings per share
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders(after deducting preference dividends and attributable taxes) by the weighted average number of equity sharesoutstanding during the period. The weighted average number of equity shares outstanding during the period areadjusted for any bonus shares issued during the year and also after the Balance Sheet date but before the date thefinancial statements are approved by the board of directors.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholdersand the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutivepotential equity shares.
The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares as appropriate. Thedilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value.Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.
(o) Employee stock option
Stock options granted to employees under the Employees Stock Option Scheme are accounted as per the intrinsic valuemethod permitted by the “Guidance Note on Share Based Payments” issued by the ICAI. Accordingly, the excess of themarket price of the shares as on the date of the grant of options over the exercise price is recognised as deferredemployee compensation and is charged to profit and loss account on straight-line basis over the vesting period.
The number of options expected to vest is based on the best available estimate and are revised, if necessary, ifsubsequent information indicates that the number of stock options expected to vest differs from previous estimates.
2. Changes in accounting policies
During the current year, the Company has changed the basis of valuation of inventories from First-in-First-Out (FIFO) toweighted average basis. As a result of this change, the value of the inventory as at March 31, 2006 is higher byRs. 2.67 crore and the profit before tax for the year is higher by a similar amount.
3. Terms of redemption of preference shares
(a) 1,500,000,10% cumulative redeemable preference shares of Rs. 100 each fully paid are redeemable at par after oneyear from March 10, 2004, which is the date of allotment, at the option of the Company or the preference shareholders,as the case may be.
(b) During the year, the Company has redeemed the 10,000,000, 0.01% cumulative redeemable preference shares ofRs. 100 each fully paid, out of the initial public offer proceeds.
4. Amount due to Small Scale Industrial undertakings (SSI) as at March 31, 2006: Rs. 5.61 crore (Rs. 18.24 crore)
SSI undertakings to whom the Company owes sums which are outstanding for more than 30 days as at March 31, 2006, havebeen determined based on the information available with the Company and the details are as under:
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Abirami Engineering Works, Anupam Industries Limited, Associated Power Structures Limited, Excel Machinery (Guj.) PrivateLimited, Nikho Engineers, Rays Electro Engineers, SSV Engineers, Anand Engineering Industries, Aureka, Indiram GeneralEngineering Works, Patson Transformers Private Limited, Prima Automation (I) Private Limited, Mukesh Engineering Industries,Bullows Paint Equipment Private Limited.
5. Provisions
In pursuance of Accounting Standard-29 (AS-29) “Provisions, Contingent Liabilities and Contingent Assets” issued by theICAI, the provisions required have been incorporated in the books of account in the following manner:
Particulars Generation Operation, Provision forguarantee maintenance liquidated
and warranty damages
Opening balance 61.47 97.73 3.97Additions 104.82 117.93 –Utilisation 24.23 42.76 –Reversal – – 1.24
Closing balance 142.06 172.90 2.73
The provision for operation, maintenance and warranty represents the expected liability on account of field failure of partsof WTG and expected expenditure of servicing the WTG's over the period of free operation, maintenance and warranty whichvaries according to the terms of each sales order.
The provision for generation guarantee represents the expected outflow of resources against claims for generation shortfallexpected in future over the life of the guarantee assured. The period of generation guarantee varies for each customeraccording to the terms of the contract. The key assumptions in arriving at the generation guarantee provisions are windvelocity, plant load factor, grid availability, load shedding, historical data, wind variation factor etc.
Provision for Liquidated Damages (LD) represents the expected claims which the Company may need to pay for non-fulfilment of certain commitments as per the terms of the sales order. These are determined on a case to case basisconsidering the dynamics of each sales order and the factors relevant to that sale.
6. Break up of the accumulated deferred tax asset, net, is given below:
Particulars Deferred tax During the Deferred taxasset/(liability) year 2005-06 asset/(liability)
as at as atMarch 31, 2005 March 31, 2006
Deferred tax asset
Provision for generation guarantee, LD, operation,maintenance and warranty 28.52 26.09 54.61Provision for doubtful debts 2.18 (0.62) 1.56Provision for bonus 0.07 (0.07) –
(a) 30.77 25.40 56.17
Deferred tax liability
Depreciation on fixed assets 3.16 (2.57) 0.59
(b) 3.16 (2.57) 0.59
Deferred tax asset (net) (c) = (a) - (b) 27.61 27.97 55.58
Tax effect of share issue expenses eligible forincome-tax deduction, under Section 35D,credited to securities premium account (d) 2.42
(c) + (d) 58.00
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7. Earnings Per Share (EPS)
All amounts in Rs. crore except per share data
Particulars As at March 31,
2006 2005
Basic earnings per share
Net profit after tax 821.19 361.46Less: Preference dividend and tax thereon 1.72 1.72
(a) Net profit attributable to equity shareholders(Numerator for computation of basic and diluted EPS) 819.47 359.74
(b) Weighted average number of equity shares in calculating basic EPS(Denominator for computation of basic EPS) 273,233,510 253,005,661Add: Equity shares for no consideration arising on grant of stock options
under ESOP 2005 430,697 –
(c) Weighted average number of equity shares in calculating diluted EPS(Denominator for computation of Diluted EPS) 273,664,207 253,005,661
Basic earning per share of face value of Rs. 10 each (a/b *10,000,000) 29.99 14.21
Diluted earning per share of face value of Rs. 10 each (a/c *10,000,000) 29.94 14.21
Note:
The Expert Advisory Committee of the Institute of Chartered Accountants of India (EAC) has issued an opinion on computation of weightedaverage shares in respect of bonus shares on new shares issued during the year. The computation of EPS (basic and diluted) for the year endedMarch 31, 2005, if computed on that basis is Rs. 13.84 per share. The figures for current year have been computed, giving effect to the EACopinion.
8. Operating leases
Premises
The Company has taken certain premises under cancellable operating leases. The total rental expense under cancellable
operating leases during the period was Rs. 2.08 crore (Rs. 1.73 crore).
The Company has also taken furnished/unfurnished offices and certain other premises under non-cancellable operating lease
agreement ranging for a period of one to five years. The lease rental charge during the year is Rs. 3.38 crore (Rs. 1.77 crore)
and maximum obligation on long term non-cancellable operating lease payable as per the rentals stated in respective
agreement are as follows:
Obligation on non-cancellable operating leases Amount
Not later than one year 3.50
Later than one year and not later than five years 0.91
Later than five years Nil
WTG's
The Company has taken WTG's on non-cancellable operating lease, chargeable on per unit basis of net electricity generated
and delivered. The lease amount would be determined in the future on the numbers of units generated. Lease rental expense
for the period is Rs. 2.37 crore (Rs. 2.35 crore).
Sub-lease rental income recognised in the statement of profit and loss account for the period is Rs. 2.37 crore(Rs. 2.35 crore).
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9. Employee stock option scheme
Suzlon Energy Employee Stock Option Plan 2005 (the 2005 Plan or the Scheme)
The Company instituted the 2005 Plan for all eligible employees in pursuance of a special resolution approved by theshareholders at the extra-ordinary general meeting held on June 16, 2005 (grant date). The Scheme covers grant of options tospecified permanent employees of the Company as well as its subsidiaries except subsidiaries in the United States of America.
Pursuant to the scheme, the Company has granted 921,000 options to eligible employees at an exercise price, which is 50% of theissue price determined in the Initial Public Offering (IPO) of the Company in accordance with SEBI Guidelines i.e,Rs. 510 per equity share. Under the terms of the scheme, 30% of the options will vest in the employees at the end of the first year,30% at the end of the second year and the balance of 40% at the end of third year from the grant date in the following manner:
Date of vesting Proportionof vesting
June 16, 2006 30%June 16, 2007 30%June 16, 2008 40%
The Employee Stock Options granted shall be capable of being exercised within a period of five years from the date of firstvesting i.e. June 16, 2006. Once the options vest as per the Schedule above, they would be exercisable by the option holderand the shares arising on exercise of such options shall not be subject to any lock-in period. Further, in the case oftermination of employment, all non-vested options would stand cancelled. Options that have vested but have not beenexercised can be exercised within the time prescribed as mentioned above, failing which they would stand cancelled.
During the year ended March 31, 2006, no eligible employees have exercised their options as the date of first vesting fallsin the succeeding year. Further, 32,000 options were forfeited as certain employees resigned from the services of theCompany. The movement in the stock options during the year was as per the table below:
Options outstanding at the beginning of the year NilGranted during the year 921,000Forfeited during the year 32,000Exercised during the year NilExpired during the year NilOptions outstanding at the end of the year 889,000Exercisable at the end of the year Nil
Fair value of the option
The Company has charged a sum of Rs. 10.36 crore (Rs. 255 per option) being the intrinsic value of option under the 2005Plan for the year ended March 31, 2006. Had the Company adopted the fair value method based on 'Black-Scholes' Model forpricing and accounting the options, the cost of option would have been Rs. 324.33 per option and accordingly, the profitafter tax would have been lower by Rs. 2.82 crore. Consequently the diluted earnings per share after factoring the aboveimpact of fair value would have been Rs. 29.95 per share instead of Rs. 29.94 per share.
10. Other notes
(a) Term loans from banks amounting to Rs. 0.82 crore (Rs. 11.97 crore) and working capital facilities from banksamounting to Rs. 104.02 crore (Rs. 212.44 crore) are secured by personal guarantee of directors.
(b) During the year, the Company has retired and disposed off certain fixed assets at various locations. In compliance withAccounting Standard - 10 “Accounting for Fixed Assets”, issued by the ICAI, these assets have been eliminated from thefinancial statements. Consequently there is a reduction in the gross block as at March 31, 2006 by Rs. 0.53 crore (Rs.4.87 crore) and the corresponding accumulated depreciation as at the same date by Rs. 0.19 crore (Rs. 4.82 crore)pertaining to these assets.
(c) Expenditure amounting to Rs. 2.85 crore (Rs. 0.26 crore) and Rs. 4.83 crore (Rs. 1.54 crore) pertaining to employeeremuneration and benefits; and operating and other expenditure, respectively, being expenditure incurred in connectionwith the construction of certain own manufacturing assets have been deducted from the respective expenditure headswhere they were charged and have been capitalised under appropriate asset heads.
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(d) Sales do not include excise duty, service tax, sales-tax or VAT charged.
(e) The Company incurs expenditure on development of infrastructure facilities for power evacuation arrangements as per
authorisation of the State Electricity Boards (SEB) / Nodal Agencies. In certain cases the expenditure is reimbursed, on
agreed terms, by the SEB/Nodal agencies and in certain cases the Company recovers it from the customers. Where the
expenditure is reimbursed by the SEB/Nodal Agency, the cost incurred is reduced by the reimbursements received and
the net amount is charged to the profit and loss account. Where an arrangement is entered into with customers for
power evacuation charges, the proportionate direct cost computed on per Mega Watt basis is netted off from the
amount charged to customers and the net deficit/(surplus) is charged / credited to profit and loss account. The deficit/
surplus from infrastructure development across all SEB's / Nodal Agencies is shown under "infrastructure development
expenses" or "other income" as the case may be. Indirect expenses not directly relatable to power evacuation are charged
to the respective account heads in the profit and loss account.
(f) Balances of sundry debtors include Rs. 0.85 crore (Rs. 22.48 crore), which are contractually payable beyond a period
of six months from the date of sale.
11. Managerial remuneration to directors
Particulars Year ended March 31,
2006 2005
Salaries 1.47 0.86
Perquisites – 0.60
Contribution to superannuation fund 0.31 0.18
Sitting fees 0.01 –
1.79 1.64
The directors are covered under the Company's scheme for gratuity along with the other employees of the Company. The
proportionate amount of gratuity is not included in the aforementioned disclosure, as the amount attributable to directors
is not ascertainable.
12. (a) Contingent liabilities
Particulars As at March 31,
2006 2005
Guarantees given on behalf of subsidiaries in respect of loansgranted to them by banks 180.77 59.05
Guarantees given on behalf of other companies in respect of loansgranted to them by banks 0.88 1.39
Claims against the Company not acknowledged as debts 0.25 1.75Bills discounted with banks – 3.32
(b) Capital commitments
Particulars As at March 31,
2006 2005
Estimated amount of contracts remaining to be executed oncapital account and not provided for net of advances 47.97 13.09
Commitments for investments in subsidiary 21.76 –
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13. Derivative instruments and unhedged foreign currency exposure
Particulars of derivatives Purpose
Forward contract outstanding as at balance sheet date
Buy DKK 386,239.60 Hedge of forex DKK liabilitiesBuy Euros 677,739.50 Hedge of forex Euro liabilitiesBuy USD 7,598,272.54 Hedge of forex USD liabilities
Target redemption forward contract
Euro 0.025 crore / Euro 0.05 crore per week for 18 weeks Hedge forex Euro liabilities
Range accrual interest rate swap
USD 0.20 crore Hedge against interest on forex loans
Particulars of unhedged foreign currency exposure as at the balance sheet date
Particulars Amount
Creditors (including goods in transit Rs. 132.32 crore) 215.15Debtors 24.32Loans given 47.20Loans received 82.00Bank balance in current accounts and term deposit accounts 4.45
14. Additional information pursuant to the provisions of paragraphs 3, 4B, 4C, 4D of part II of the Schedule VI of theCompanies Act, 1956
(a) Auditors' remuneration and expenses
Particulars Year ended March 31,
2006 2005
Statutory audit fees 1.82 0.46Tax audit fees 0.03 0.02Taxation matters 0.12 –Other services 0.15 0.65Reimbursement of out of pocket expenses 0.13 0.08
2.25 1.22
(b) Licensed and installed capacities and production
Particulars Installed Units produced
capacity (Nos.) (in Nos.) (in MW’s)
Wind turbine generators
Upto 1 MW 83.00 36.05(63.00) (22.70)
Above 1 MW & Upto 2 MW 740.00 927.65(383.00) (478.75)
Above 2 MW 8.00 16.80( – ) ( – )
Blades * 2,460.00 –(1,172.00) –
(See note below) 831.00 980.50(446.00) (501.45)
*used for captive consumption
Note:
The installed capacities in respect of WTG's and blades have not been disclosed, as these are variable and subject to changes in product
mix and utilisation of manufacturing facilities, given the nature of its operations.
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(c) Details of opening stock, turnover and closing stock
Particulars Year ended March 31, 2006 Year ended March 31, 2005
Nos. MW Amount Nos. MW Amount
Opening stock
Wind turbine generatorsUpto 1 MW – – – – – –Above 1 MW & upto 2 MW – – – 5.00 6.25 14.12Above 2 MW – – – – – –Land / Lease rights N.A. N.A. 10.45 N.A. N.A. 1.08
– – 10.45 5.00 6.25 15.20
Turnover
Wind turbine generatorsUpto 1 MW 83.00 36.05 135.95 63.00 22.70 71.58Above 1 MW & upto 2 MW 740.00 927.65 3,479.80 388.00 485.00 1,821.39Above 2 MW 8.00 16.80 44.59 – – –Wind turbine generator parts N.A. N.A. 64.92 N.A. N.A. 19.54Land / Lease rights and others N.A. N.A. 63.20 N.A. N.A. 4.98
831.00 980.50 3,788.46 451.00 507.70 1,917.50
Closing stock
Wind turbine generatorsUpto 1 MW – – – – – –Above 1 MW & upto 2 MW – – – – – –Above 2 MW – – – – – –Land/Lease rights N.A. N.A. 39.40 N.A. N.A. 10.45
– – 39.40 – – 10.45
(d) Raw materials consumed
Particulars (Units) Year ended March 31,
2006 2005
Qty. Amount Qty. Amount
Gear box (Nos.) 855 395.17 466 223.65Tower (tonnes) 78,241 453.35 43,198 244.62Others (see note below) Various 1,431.18 Various 711.51
2,279.70 1,179.78
Note:It is not practicable to furnish quantitative information in view of large number of items which differ in size and nature, each being lessthan 10% in value of the total raw materials consumed.
(e) Imported and indigenous consumption
Particulars Year ended March 31,
2006 2005
Amount % Amount %
Raw materialsImported 1,249.50 54.81 591.81 50.16Indigenous 1,030.20 45.19 587.97 49.84
2,279.70 100.00 1,179.78 100.00
Stores and sparesImported 1.02 7.58 Nil –Indigenous 12.43 92.42 6.54 100.00
13.45 100.00 6.54 100.00
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Value of imports on CIF basis
Particulars Year ended March 31,
2006 2005
Raw materials 1,463.79 708.03Stores and spares 1.07 –Capital goods 28.17 21.70
1,493.03 729.73
(f) Expenditure in foreign currency (on accrual basis)
Particulars Year ended March 31,
2006 2005
Consultancy 2.09 1.76R & D and quality assurance 20.23 10.60Interest 12.27 4.41Others 22.40 21.06
56.99 37.82
(g) Dividend remitted in foreign currency during the year
Rs. 0.69 crore (Rs. 1.37crore) has been remitted in foreign currency on account of dividends.
No. of non-resident Amount of preference/ Year to which No. of equity/shareholders equity dividend remitted dividend relates preference shares
(in USD) held on whichdividend was due
1 157,383.13 2004-05 61,47,5401 736.56 2004-05 50,00,0001 609.61 2005-06 50,00,000
(h) Earnings in foreign currency (on accrual basis)
Particulars Year ended March 31,
2006 2005
Export sales (F.O.B. value) 211.53 0.58Interest on loans 1.30 2.22
212.83 2.80
(i) Statement showing the use of proceeds from Initial Public Offer upto March 31, 2006
During the year ended March 31, 2006, the Company had issued 29,340,000 equity shares by way of initial publicoffering at a price of Rs. 510 per share. Out of the total issue, 2,577,320 equity shares were offered by CiticorpInternational Finance Corporation Inc. as Offer for Sale. The net proceeds of the issue, have been utilised for the objectsof the issue to the extent as detailed below;
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Description Estimated Actual
(a) Total issue proceeds 1,364.90 1,364.90(b) Less: Issue expense 47.00 40.67
(c) Net issue proceeds [(a)-(b)] 1,317.90 1,324.23
Used for:(i) Setting up and expansion of manufacturing facilities in India 195.04 101.72
(ii) Capitalisation of subsidiaries 352.49 185.53
(iii) New corporate house and corporate learning centre 96.79 16.79
(iv) Redemption of preference shares allotted to theprivate equity investors 100.00 100.00
(v) Utilisation towards growth opportunities in domestic andinternational markets / interim use of funds [(c)-(i)-(ii)-(iii)-(iv)] 573.58 920.19
The amount of Rs. 920.19 crore, includes an amount towards fixed deposits aggregating Rs. 55.41 crore. Further, thisamount also includes amounts paid towards reduction of cash credit utilisation and working capital. The Companywould ensure consistent and timely availability of the issue proceeds so temporarily used/deposited for reduction ofworking capital to timely meet the estimated fund requirements stated above.
15. Related party disclosures
As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactionswith the related parties as defined in the Accounting Standard are given below:
(a) List of the related parties and nature of relationship where control exists
Name of the party Nature of relationship
AE-Rotor Holding B.V. Subsidiary Company
AE-Rotor Techniek B.V. Subsidiary Company
Suzlon Energy B.V. * Subsidiary Company
Suzlon Energy GmbH Subsidiary Company
Suzlon Windfarm Services Limited Subsidiary Company
Suzlon Energy A/S Subsidiary Company
Suzlon Wind Energy Corporation Subsidiary Company
Suzlon Energy Australia Pty. Limited Subsidiary Company
Suzlon Structures Private Limited Subsidiary Company
Suzlon Towers and Structures Limited (Formerly Suzlon Green Power Limited) Subsidiary Company
Suzlon Windkraft GmbH* (Formerly Constellation GmbH) Subsidiary Company
Cannon Ball Wind Energy Park-I, LLC * Subsidiary Company
Suzlon Generators Private Limited Subsidiary Company
Windpark Olsdorf WATT GmbH & Co KG Subsidiary Company
Suzlon Windpark Management GmbH Subsidiary Company
Suzlon Rotor Corporation Subsidiary Company
Suzlon Power Infrastructure Private Limited Subsidiary Company
Suzlon Energy (Tianjin) Limited Subsidiary Company
SE Drive Techniek GmbH Subsidiary Company
Suzlon Gujarat Wind Park Limited Subsidiary Company
Suzlon Engitech Private Limited (Formerly Sarjan Engitech Private Limited) Subsidiary Company
Suzlon Energy Limited, Mauritius* Subsidiary Company
* No transactions taken place during the year
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(b) Other related parties with whom transactions have taken place during the year
(i) Associates
Suzlon Infrastructure Limited (formerly Suzlon Developers Limited), Sarjan Realities Limited.
(ii) Entities where Key Management Personnel (KMP) / Relatives of Key Management Personnel (RKMP) has significantinfluence.
Suzlon Capital Limited, Suzlon Hotels Limited, Sarjan Infrastructure Finance Limited, Shubh Realty (South) PrivateLimited, Sugati Holdings Private Limited and Kush Synthetics Private Limited.
(iii) Key management personnel
Tulsi R. Tanti, Girish R. Tanti, Vinod R. Tanti and Balrajsinh. A. Parmar, (See note below).
(iv) Relatives of key management personnel
Gita T. Tanti, Rambhaben Ukabhai, Pranav T. Tanti, Nidhi T. Tanti, Jitendra R. Tanti, Sangita V. Tanti, Lina J. Tanti,Esha G. Tanti, Sheela B. Parmar, Ranjitsinh A. Parmar, Amarsinh A. Parmar, Kiritsinh A. Parmar.
(v) Employee funds
Suzlon Energy Limited - Superannuation Fund.Suzlon Energy Limited - Employees Group Gratuity Scheme.
Note:
Vinod R. Tanti and B. A. Parmar have been Directors of the Company till June 30, 2005, and hence are not considered as KMP post
June 30, 2005.
(c) Transactions between the Company and related parties and the status of outstanding balances as at March 31, 2006
Particulars Subsidiary Associate Entities KMP RKMP Employeewhere funds
KMP/RKMP has
significantinfluence
Transactions
Purchase of fixed assets 31.12 – – – – –(including intangibles) (12.32) – – – – –
Sale of Fixed Assets – – – – – –– (0.02) – (0.16) (0.06) –
Subscription to/Purchase of 6.61 – – – – –Preference Shares (0.89) (5.00) (0.13) (2.45) (2.79) –
Subscription to/Purchase 163.86 – – 0.03 0.35 –of Equity Shares (84.81) – – (1.54) (3.96) –
Sale of investments 3.50 0.65 – – – –(19.65) – (1.24) – – –
Loans/Deposit given 175.63 202.82 – – – –(64.63) (430.17) (0.03) – – –
Sale of Goods 314.55 53.54 – – – –(4.31) (36.12) – – – –
Discount Given on Sale – – – – – –(4.55) – – – – –
Purchase of Goods and 276.06 17.08 0.07 – – –Services (36.77) (15.44) (3.41) – – –
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(c) Transactions between the Company and related parties and the status of outstanding balances as at March 31, 2006(Contd.)
Particulars Subsidiary Associate Entities KMP RKMP Employeewhere funds
KMP/RKMP has
significantinfluence
Interest Received 5.92 10.76 – – – –(4.38) (10.96) (0.05) – – –
Dividend Received 2.67 0.42 – – – –(2.26) (0.21) – – – –
Dividend Paid – – 8.90 7.59 44.10 –– – (4.21) (4.27) (24.55) –
Rent Received* 0.00 – – – – –(0.00) (0.05) – – – –
Rent / Hotel Charges Paid 0.01 – 0.03 – – –– – (0.41) – – –
Bank Commissions Reimbursed 0.91 – – – – –– – – – – –
Managerial Remuneration – – – 1.78 – –– – – (1.63) – –
Contribution to Various Funds – – – – – 2.49– – – – – (0.89)
Guarantees Given 170.71 – – – – –(48.00) – – – – –
Outstanding Balances
Investments 21.02 6.00 0.87 – – –(17.90) (6.65) (0.87) – – –
Advance from Customers 53.91 – – – – –– – – – – –
Sundry Debtors 42.94 17.93 – – – –(2.35) (10.41) – – – –
Loans / Deposits Outstanding 168.14 184.82 – – – –(65.35) (186.13) (3.92) – – –
Advances / Deposits to Suppliers 9.51 – – – – –– – (1.73) – – –
Sundry Creditors 31.18 5.87 0.01 – – –(11.15) (0.20) (0.14) – – –
Corporate Guarantees 180.77 0.88 – – – –(62.92) (1.39) – – – –
Dividend Receivable 1.81(1.94)
* below Rs. 0.01 crore
Notes:
Guarantees amounting to Rs. 22.31 crore (Rs. 42.51 crore) have been given jointly by a combination of either or all of the followingentities in connection with various loans taken by the Company:
Suzlon Infrastructure Limited (Formerly Suzlon Developers Limited) and Sarjan Realities Limited.
Certain subsidiaries and group companies have been allowed to make free of charge use of SAP software owned by the Company.
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(d) Disclosure of significant transactions with related parties
Type of the transaction Type of Name of the entity / Person Year ended March 31,relationship
2006 2005
Purchase of fixed assets Subsidiary AE-Rotor Techniek B.V. 8.09 6.06
(Including intangibles) Subsidiary Suzlon Energy GmbH 8.46 1.44
Subsidiary AE-Rotor Holding B.V. 14.56 4.82
Sale of fixed assets KMP Girish R. Tanti – 0.16
RKMP Ranjitsinh A. Parmar – 0.06
Subscription to / Purchase of Associate Suzlon Infrastructure Limited – 5.00preference shares (Formerly Suzlon Developers Limited)
Subsidiary Suzlon Structures Private Limited 6.61 0.89
Subscription to / Purchase of Subsidiary Suzlon Energy A/S 80.32 52.74
equity shares Subsidiary Suzlon Generators Private Limited – 8.71
Subsidiary Suzlon Structures Private Limited – 10.75
Subsidiary AE-Rotor Holding B.V. 3.79 3.08
Subsidiary Suzlon Wind Energy Corporation – 4.47
Subsidiary Suzlon Rotor Corporation 28.24 –
Subsidiary Suzlon Energy (Tianjin) Limited 24.39 –
Sale of investments Subsidiary Suzlon Energy A/S – 19.65
Subsidiary Suzlon Windfarm Services Limited 3.50 –
Associate Suzlon Infrastructure Limited(Formerly Suzlon Developers Limited) 0.65 1.24
Loan / Deposits given Subsidiary Suzlon Wind Energy Corporation – 5.38
Subsidiary Suzlon Windfarm Services Limited 54.86 30.32
Associate Suzlon Infrastructure Limited(Formerly Suzlon Developers Limited) 5.27 206.41
Associate Sarjan Realities Limited 120.50 223.76
Entities where Shubh Realty (South) Private Limited 70.22 –KMP/ RKMPhas significantinfluence
Sale of goods Subsidiary Suzlon Wind Energy Corporation 218.97 –
Subsidiary Suzlon Windfarm Services Limited 5.94 3.58
Subsidiary Suzlon Structures Private Limited 45.00 –
Subsidiary Suzlon Energy A/S 39.01 –
Associate Suzlon Infrastructure Limited 36.77 36.12(Formerly Suzlon Developers Limited)
Discount given on sale Subsidiary Suzlon Wind Energy Corporation – 4.55
Purchase of goods and services Subsidiary Suzlon Windfarm Services Limited 60.52 26.19
Subsidiary AE-Rotor Techniek B.V. 2.87 2.54
Subsidiary Suzlon Structures Private Limited 157.83 1.83
Associate Suzlon Infrastructure Limited 13.76 15.44(Formerly Suzlon Developers Limited)
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(d) Disclosure of significant transactions with related parties (Contd.)
Type of the transaction Type of Name of the entity / Person Year ended March 31,
relationship 2006 2005
Interest received Subsidiary AE-Rotor Holding B.V. 0.67 0.67
Subsidiary Suzlon Wind Energy Corporation 0.03 1.19
Subsidiary Suzlon Windfarm Services Limited 2.26 1.16
Associate Sarjan Realities Limited 5.94 7.81
Associate Suzlon Infrastructure Limited(Formerly Suzlon Developers Limited) 1.30 3.15
Entities where Shubh Realty (South) Private Limited 3.48 –KMP/RKMPhas significantinfluence
Dividends received / Accrued Subsidiary Suzlon Windfarm Services Limited 1.18 1.48
Subsidiary Suzlon Towers & Structures Limited 0.59 0.78(Formerly Suzlon Green Power Limited)
Subsidiary Suzlon Generators Private Limited 0.44 –
Subsidiary Suzlon Structures Private Limited 0.47 –
Associate Suzlon Infrastructure Limited 0.29 0.08(Formerly Suzlon Developers Limited)
Associate Sarjan Realities Limited 0.13 0.13
Dividends paid KMP Tulsi R. Tanti and Girish R. Tanti 7.59 4.27
RKMP Relatives of KMP 44.10 24.55
Entities where Suzlon Capital Limited, Sugati Holdings 8.90 4.21KMP/RKMP Private Limitedhas significantinfluence
Rent received Associate Suzlon Infrastructure Limited – 0.05(Formerly Suzlon Developers Limited)
Rent / Hotel charges paid Entities where Suzlon Hotels Limited 0.03 0.17KMP/RKMPhas significantinfluence
Entities where Suzlon Engitech Private Limited – 0.24KMP/RKMPhas significantinfluence
Subsidiary Suzlon Windfarm Services Limited 0.01 –
Bank commissions Subsidiary Suzlon Energy A/S 0.81 –reimbursed to SEL
Subsidiary Suzlon Energy Australia Pty. Limited 0.10 –
Managerial remuneration KMP Tulsi R. Tanti 1.17 0.44
KMP Girish R. Tanti 0.41 0.39
KMP Vinod R. Tanti 0.10 0.39
KMP Balrajsinh A. Parmar 0.10 0.41
Contribution to various funds Employee Suzlon Energy Limited - 1.28 0.89funds Superannuation fund
Employee Suzlon Energy Limited - 1.21 –funds Employees group gratuity scheme
Guarantees given Subsidiary Suzlon Structures Private Limited 54.00 32.00
Subsidiary Suzlon Windfarm Services Limited – 16.00
Subsidiary Suzlon Energy A/S 91.71 –
Subsidiary Suzlon Generators Private Limited 25.00 –
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16. Disclosure as required by clause 32 of listing agreement with stock exchanges
Type of relationship Name Amount Maximumoutstanding Amount
as at outstandingMarch 31, 2006 during the year
Subsidiaries Suzlon Engitech Private Limited 6.36 9.85
Suzlon Generators Private Limited 1.50 2.50
Suzlon Towers and Structures Limited 15.16 16.30(Formerly Suzlon Green Power Limited)
Suzlon Structures Private Limited – 5.26
Suzlon Windfarm Services Limited 56.83 61.08
Suzlon Gujarat Wind Park Limited 8.65 10.85
Suzlon Power Infrastructure Private Limited 28.25 32.15
AE-Rotor Holding B.V. 26.88 28.65
Suzlon Energy GmbH 12.18 12.18
Suzlon Rotor Corporation 4.24 4.24
SE Drive Technik GmbH 0.68 0.68
Suzlon Wind Energy Corporation – 8.85
Suzlon Energy Australia Pty. Limited – 2.06
Associates Sarjan Realities Limited 112.42 114.54
Suzlon Infrastructure Limited – 75.00(Formerly Suzlon Developers Limited)
Where control of Sarjan Infrastructure Finance Limited 2.18 4.93KMP/RKMP exists
Shubh Realty (South) Private Limited 70.22 70.22
Notes:
(a) All the above balance of loans are excluding accrued interest aggregating Rs.1.41 crore and are payable on demand.
(b) No loans have been granted by Suzlon Energy Limited to any person, who has invested in the shares of Suzlon Energy Limited orany of its subsidiaries.
(c) There are no balances outstanding from Companies under the same management, as per the provisions of Section 370 (1B) ofthe Companies Act, 1956.
17. Segment Reporting
In accordance with Accounting Standard-17 - “Segment Reporting” issued by the Institute of Chartered Accountants ofIndia, the Company has identified its business segment as Wind Turbine Generator (WTG), there are no other primaryreportable segments.
18. Prior year amounts have been reclassified wherever necessary to conform with current year presentation. Figures in thebrackets are in respect of the previous year.
Signatures to Schedules 'A' to 'O'
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
SUZLON ENERGY LIMITED
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Registration details: Registration No.: 25447 State Code 04
Balance sheet date: March 31, 2006
In Rs. thousand, except per share data
Capital raised during the year
Public issue 1,36,48,967
Rights issue –
Bonus issue 17,38,458
Private placement –
Position of mobilization and deployment of funds
Total liabilities 3,15,76,245
Total assets 3,15,76,245
Sources of funds
Paid-up capital 30,25,314
Employee stock options 1,03,643
Reserves and surplus 2,50,93,575
Secured loans 27,66,139
Unsecured loans 5,87,574
Application of funds
Net fixed assets 37,19,162
Investments 29,27,467
Net current assets 2,43,49,640
Deferred tax assets 5,79,976
Miscellaneous expenditure –
Accumulated losses –
Performance of the Company
Sales 3,78,84,566
Other income 6,92,825
Total income 3,85,77,391
Profit/loss before tax 90,26,551
Profit/loss after tax 82,11,809
Earnings per share (Basic) (Rs.) 29.99
Earnings per share (Diluted) (Rs.) 29.94
Dividend rate (%) (Equity share of par value Rs. 10 each) 50%
Generic names of principal products/services of Company
Item Code No. (ITC Code) 3601
Product Description Wind operated electricity generators
Balance sheet abstract and Company’s general business profile
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SUZLON ENERGY LIMITED
Statement pursuant to Section 212 of the Companies Act, 1956,relating to Company’s interest in subsidiary companies as on
and for the year ended March 31, 2006
1. Name of the subsidiary company AE-Rotor Holding AE-Rotor Techniek Suzlon Energy B.V. Suzlon Energy A/S, SuzlonB.V. B.V. Denmark Wind Energy
Corporation
2. Financial year ended on March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006
3. Number of shares held by Suzlon Energy Limited in the subsidiary companies at the end of the financial year of the subsidiary companies
(a) Equity shares 244,000 Refer Note 1 Refer Note 1 1,422,137 Refer Note 2Equity shares Equity shares
of Euro 10 each of 100 DKK each
(b) Preference shares – – – – –
(c) Extent of equity holding 100% Refer Note 1 Refer Note 1 100% Refer Note 2
(d) Extent of preference holding – – – – –
4. Net aggregate amount of profit / (losses) of the subsidiary for the above financial year so far as they concern the members of Suzlon Energy Limited
(a) Dealt with in the accounts of Suzlon Energy Limited N i l N i l N i l N i l N i l
(b) Not dealt with in the accounts ofSuzlon Energy Limited (0.61) 0.53 (0.02) (11.18) (27.83)
5. Net aggregate amount of profit / (losses) of the subsidiary for the previous financial years so far as they concern the members of Suzlon Energy Limited
(a) Dealt with in the accounts of Suzlon Energy Limited N i l N i l N i l N i l N i l
(b) Not dealt with in the accountsof Suzlon Energy Limited 1.03 1.76 (0.30) (1.86) (21.73)
6. Material changes if any between the end of the financial year of the subsidiary and Suzlon Energy Limited
(a) Fixed assets NA NA NA NA NA
(b) Investments NA NA NA NA NA
(c) Money lent by it NA NA NA NA NA
(d) Money borrowed by it other than formeeting current liabilities NA NA NA NA NA
Cannon Ball Suzlon Energy Suzlon Energy Windpark OlsdorfWind Energy Australia Pty. Ltd. GmbH Watt GmbH &
Park-I, LLC (Please refer note 2) Co KG.
March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006
Refer Note 3 Refer Note 2 2 Refer Note 4Equity shares
of Euro 12,500 each
– – – –
Refer Note 3 Refer Note 2 100% Refer Note 4
– – – –
N i l N i l N i l N i l
(0.03) (13.87) 0.13 (0.29)
N i l N i l N i l N i l
(0.57) (2.35) 0.19 N i l
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
Note:
1 AE-Rotor Holding B.V. holds:
1,800 Equity shares of Euro 10 each in AE-Rotor Techniek B.V. constituting 100% of its paid up capital and
1,800 Equity shares of Euro 10 each in Suzlon Energy B.V. constituting 100% of its capital
2 Suzlon Energy A/S Denmark holds
5,550,001 Equity shares of AUD 1 each in Suzlon Energy Australia Pty. Ltd.
1,000 Equity shares of USD 1 each in Suzlon Wind Energy Corporation
3 Suzlon Wind Energy Corporation holds:
1,000 Equity shares of USD 1 each in Cannon Ball Wind Energy Park – I, LLC constituting 100% of its paid up capital.
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Suzlon Rotor Suzlon Windcraft SE Drive Techniek Suzlon Windpark Suzlon Windfarm Suzlon Towers and Suzlon Generators Suzlon Structures Suzlon Gujarat Suzlon Power Suzlon EngitechCorporation GmbH GmbH Management GmbH Services Limited Structures Limited Private Limited Private Limited Wind Park Limted Infrastructure Private Limited
(formerly (formerly Suzlon Private Limited (formerly SarjanConstellation GmbH) Green Power Limited) Engitech Private
Limited
March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006
1,000 Refer Note 5 1 1 13,000,000 4,990,000 8,721,500 11,249,500 2,000,000 3,010,000 1,500,000Equity shares Equity share of Equity share of Equity shares Equity shares Equity shares Equity shares Equity shares Equity shares Equity sharesof 1 USD each 25,000 Euro each 25,000 Euro each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each
– – – – 900,000 451,000 – 750,000Preference shares Preference shares Preference sharesof Rs. 100 each of Rs. 100 each of Rs. 100 each
100% Refer Note 5 100% 100% 100% 100% 75% 75% 100% 100% 100%
– – – – 100% 100% – 75% – – –
N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l
0.42 (0.47) (0.86) (0.02) 3.18 1.08 0.72 2.13 0.90 0.63 0.86
N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l
N i l (0.02) N i l – 7.27 2.28 N i l (0.29) (0.17) 0.03 (0.11)
NA NA NA NA NA NA NA NA NA NA NA
NA NA NA NA NA NA NA NA NA NA NA
NA NA NA NA NA NA NA NA NA NA NA
NA NA NA NA NA NA NA NA NA NA NA
4 Suzlon Energy GmbH as an investing partner holds:
1 Equity share of Euro 2,500 in Windpark Olsdorf Watt GmbH & Co. KG. (a partnership company of Suzlon Energy GmbH, investing partner and Suzlon WindparkManagement GmbH, managing partner) constituting 100% of its paid up capital.
5 Suzlon Energy Drive Techniek holds:
2 Equity share of Euro 12,500 each in Suzlon Windkraft GmbH (formerly Constellation GmbH), constituting 100% of its paid up capital.
6 The figures in 4(b) above include profit / (loss) for 15 months for overseas subsidiaries whose financial year has changed from year ending December 31st toMarch 31st.
Amount in Rs. crore
For and on behalf of the Board of Directors
Tulsi R. TantiChairman & Managing Director
Girish R. TantiDirector
Place : New DelhiDate : May 15, 2006
Hemal A. KanugaCompany Secretary
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Details regarding subsidiaries as on and for theyear ended on March 31, 2006
Name of the subsidiary company Issued and Reserves Total assets Total liabilitiessubscribed
share capital
AE-Rotor Holding B.V. 13.15 0.42 40.47 40.47
AE-Rotor Techniek B.V. 0.07 2.29 18.31 18.31
Suzlon Energy B.V. 0.07 (0.32) 3.88 3.88
Suzlon Energy A/S, Denmark 105.51 14.51 319.67 319.67
Suzlon Wind Energy Corporation 65.98 (49.56) 402.25 402.25
Cannon Ball Wind Energy Park-I, LLC 0.00 0.60 0.12 0.12
Suzlon Energy Australia Pty. Limited 18.48 (16.22) 35.61 35.61
Suzlon Energy GmbH 13.61 0.32 29.99 29.99
Windpark Olsdorf Watt GmbH & Co KG. 3.82 0.29 12.67 12.67
Suzlon Rotor Corporation 28.24 0.42 41.56 41.56
Suzlon Windkraft GmbH (Formerly Constellation GmbH) 0.64 (0.49) 0.20 0.20
SE Drive Techniek GmbH 2.01 (0.86) 2.04 2.04
Suzlon Windpark Management GmbH 0.16 (0.02) 0.16 0.16
Suzlon Windfarm Services Limited 22.00 9.11 154.59 154.59
Suzlon Towers and Structures Limited 9.50 2.69 34.16 34.16(Formerly Suzlon Green Power Limited)
Suzlon Generators Private Limited 11.63 0.30 69.49 69.49
Suzlon Structures Private Limited 25.00 1.73 127.74 127.74
Suzlon Gujarat Wind Park Limited 2.00 0.73 14.23 14.23
Suzlon Power Infrastructure Private Limited 3.01 0.66 42.35 42.35
Suzlon Engitech Private Limited 1.50 0.75 11.48 11.48(Formerly Sarjan Engitech Private Limited)
The exchange rates as on March 31, 2006 are (USD 1.00 =Rs. 44.615, AUD 1.00 = Rs. 31.812, DKK 1.00 = Rs. 7.237 and Euro 1.00 = Rs. 54.005).
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Investments Turnover Profit / (Loss) Provision for Profit / (Loss) Proposedfor taxation taxation & after taxation dividend
deffered tax
0.15 14.56 0.02 (0.08) 0.10 –
– 30.42 (0.09) 0.21 (0.30) –
– – (0.02) – (0.02) –
0.49 7.90 (11.40) (4.29) (7.11) –
0.00 310.56 (51.52) (29.34) (22.18) –
– – (0.01) – (0.01) –
– – (12.09) – (12.09) –
Note 1 11.96 0.50 0.46 0.04 –
– 0.00 (0.25) – (0.25) –
– – – (0.42) 0.42 –
– – (0.47) – (0.47) –
Note 1 – (0.86) – (0.86) –
– – (0.02) – (0.02) –
0.02 79.36 8.40 5.22 3.18 0.09
0.01 4.91 1.19 0.11 1.08 0.59
– 15.83 1.65 0.69 0.96 0.58
– 155.68 4.38 1.54 2.84 0.63
0.00 11.39 1.38 0.48 0.90 –
– 12.84 0.95 0.32 0.63 –
– 18.35 1.29 0.43 0.86 –
Amount in Rs. crore
For and on behalf of the Board of Directors
Tulsi R. TantiChairman & Managing Director
Girish R. TantiDirector
Place : New DelhiDate : May 15, 2006
Hemal A. KanugaCompany Secretary
SUZLON ENERGY LIMITED
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Consolidated financial statements
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SUZLON ENERGY LIMITED
Auditors’ report on consolidated financial statements
ToThe Board of Directors of Suzlon Energy Limited
1. We SNK & Co. and S.R. Batliboi & Co., have audited the attached consolidated balance sheet of Suzlon Energy Limited (SEL) andits subsidiaries (together referred to as 'the Group', as described in Schedule P, Note 5) as at March 31, 2006 and also theconsolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto.These consolidated financial statements are the responsibility of SEL's management. Our responsibility is to express an opinionon these consolidated financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.
3. We did not jointly audit the financial statements of the following companies, whose total revenues and assets to the extent theyare included in the consolidated financial statements of the Group are as given below:
Name of the Company Extent of share in consolidated
Revenues (%) Assets (%)
Suzlon Windfarm Services Limited 0.71 3.06Suzlon Towers and Structures Limited (Formerly Suzlon Green Power Limited) 0.14 0.53Suzlon Generators Private Limited – 1.44Suzlon Structures Private Limited 0.06 2.65Suzlon Power Infrastructure Private Limited 0.02 0.86Suzlon Gujarat Wind Park Limited 0.06 0.30Suzlon Engitech Private Limited (Formerly Sarjan Engitech Private Limited) – 0.17
These financial statements have been audited solely by SNK & Co., Chartered Accountants and have been accepted withoutverification by S.R. Batliboi & Co., Chartered Accountants and hence our joint audit opinion insofar as it relates to the amountsincluded in respect of these subsidiaries, is based solely on the report of SNK & Co., Chartered Accountants.
4. We did not audit the financial statements of the following companies, whose total revenues and assets to the extent they areincluded in the consolidated financial statements of the group are as given below:
Name of the Company Extent of share in consolidated
Revenues (%) Assets (%)
Suzlon Energy A/S, Denmark [See note 1 below ('Suzlon Denmark')] 8.22 8.26Suzlon Rotor Corporation – 0.84AE-Rotor Holdings B.V., Netherlands [See note 2 below ('AERH')] – 0.95Suzlon Energy GmbH – 0.47Windpark Olsdorf WATT GmbH & Co. KG – 0.21Suzlon Windpark Management GmbH – –SE Drive Techniek GmbH – 0.04Suzlon Windkraft GmbH (Formerly Constellation GmbH) – –Suzlon Energy (Tianjin) Limited – 0.51
Note :
1. The financial statements of Suzlon Energy A/S, Denmark, include the financial statements of Suzlon Energy Australia Pty. Limited and theconsolidated financial statements of Suzlon Wind Energy Corporation.
2. The financial statements of AERH include the standalone financial statements of AERH and its subsidiaries AE-Rotor Techniek B.V. andSuzlon Energy B.V.
These financial statements have been prepared under the relevant applicable Generally Accepted Accounting Principles (GAAP) ofthe country where the subsidiary is registered. Adjustments have been made to realign the accounting policies of these subsidiariesto those of SEL, which have been reviewed by us jointly for the year ended March 31, 2006.
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5. We report that the consolidated financial statements have been prepared by SEL's management in accordance with therequirements of Accounting Standard-21, consolidated financial statements, issued by the Institute of Chartered Accountantsof India and on the basis of the separate financial statements of SEL and its subsidiaries.
6. In our opinion and to the best of our information and according to the explanations given to us, the attached consolidatedfinancial statements give a true and fair view in conformity with the accounting principles generally accepted in India;
(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at March 31, 2006
(b) in the case of the Consolidated Profit and Loss Account of the profit of the Group for the year ended on that date;
(c) in the case of the Consolidated Cash Flow statement of the cash flows of the Group for the year then ended on that date.
SNK & Co. S.R. BATLIBOI & Co.Chartered Accountants Chartered Accountants
per Jasmin B. Shah per Arvind SethiPartner Partner
Membership No: 46238 Membership No: 89802
Place : Pune Place : PuneDate : May 15, 2006 Date : May 15, 2006
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Particulars Schedule As at March 31,
2006 2005
SOURCES OF FUNDS
Shareholders' funds
Share capital A 302.53 201.92Share application money of subsidiary company pending allotment 0.19 0.05Employee stock options B 10.36 –Reserves and surplus C 2,421.71 702.36
2,734.79 904.33
Preference shares issued by subsidiary company 2.50 0.30(See Schedule - P, Note 6(b))
Minority interest 7.47 6.45
Loan funds
Secured loans D 389.89 356.72Unsecured loans E 60.81 39.09
450.70 395.81
3,195.46 1,306.89APPLICATION OF FUNDS
Fixed assets F
Gross block 629.27 359.69Less: Depreciation 153.57 80.77
Net block 475.70 278.92Capital work-in-progress 165.16 28.94
640.86 307.86Preoperative expenses, pending allocation 1.67 –
Investments G 7.60 7.76
Deferred tax asset, net (See Schedule - P, Note 7) 81.76 24.11
Current assets, loans and advances H
Inventories 1,331.02 575.57Sundry debtors 1,647.31 692.89Cash and bank balances 551.49 154.46Loans and advances 640.72 324.73
4,170.54 1,747.65Less: Current liabilities and provisions I
Current liabilities 1,297.71 598.00Provisions 410.11 182.90
1,707.82 780.90
Net current assets 2,462.72 966.75Miscellaneous expenditure J 0.85 0.41(To the extent not written off or adjusted)
3,195.46 1,306.89Significant accounting policies and notes to the consolidated financial statements P
Consolidated balance sheet as at March 31, 2006All amounts in rupees crore unless otherwise stated
The schedules referred to above and the notes to accounts form an integral part of the consolidated balance sheet.
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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Particulars Schedule Year ended March 31,
2006 2005
INCOME
Sales and service income 3,841.03 1,942.48Other income K 55.64 23.43
3,896.67 1,965.91
EXPENDITURE
Cost of goods sold L 2,309.08 1,137.69Operating and other expenses M 512.14 273.74Employees' remuneration and benefits N 121.58 61.79Financial charges O 64.77 45.83Depreciation F 71.59 49.33Preliminary expenditure written off J 0.18 0.18
3,079.34 1,568.56
PROFIT BEFORE TAX AND MINORITY INTEREST 817.33 397.35
Current tax 110.30 48.91Earlier years' tax 0.17 0.06Fringe benefit tax 3.16 –Deferred tax (56.82) (16.74)
56.81 32.23
PROFIT BEFORE MINORITY INTEREST 760.52 365.12Add / (Less) : Share of loss/(profit) of minority (1.02) 0.21
NET PROFIT 759.50 365.33Balance brought forward 501.66 278.18
PROFIT AVAILABLE FOR APPROPRIATIONS 1,261.16 643.51
Interim dividend on equity shares 71.88 23.18Proposed dividend on equity shares 72.03 11.59Dividend on preference shares 1.66 1.96Tax on dividends 20.78 5.12Transfer to general reserve 300.00 100.00
466.35 141.85
Balance carried to Balance Sheet 794.81 501.66
Earnings per share (in Rs.)Basic [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 27.73 14.34(See Schedule - P, Note 10)Diluted [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 27.68 14.34(See Schedule - P, Note 10)
Significant accounting policies and notes to the Pconsolidated financial statements
Consolidated profit and loss account for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated
The schedules referred to above the notes to accounts form an integral part of the consolidated profit and loss account.
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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SUZLON ENERGY LIMITED
Particulars Year ended March 31,2006 2005
CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation and minority interest 817.33 397.35
Adjustments for:Depreciation 71.59 49.33Loss on sale of investments – 0.01Loss on sale/disposal of assets 0.53 0.48Preliminary expenses incurred (0.62) –Preliminary expenses written off 0.18 0.18Interest expenses 50.76 35.26Interest income (31.17) (18.10)Dividend income (0.42) (0.34)Adjustments on consolidation 3.60 6.81Provision (reversal) for doubtful debts / loans (4.82) 9.33Employee stock option scheme 10.36 –Provision for operation, maintenance and warranty 85.77 57.84Provision for power generation guarantee 106.51 45.07Wealth-tax 0.02 0.01
Operating profit before working capital changes 1,109.62 583.23Movements in working capital(Increase) / Decrease in loans and advances (296.09) (12.74)(Increase) / Decrease in sundry debtors (950.21) (354.09)(Increase) / Decrease in inventories (754.35) (341.41)Increase / (Decrease) in current liabilities 667.77 284.71
Cash (used in)/generated from operations (223.26) 159.70Direct taxes paid (net of refunds) (130.76) (41.55)
Net cash (used in) / generated from operating activities (354.02) 118.15CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (405.97) (152.08)Proceeds from sale of fixed assets 2.16 9.91Purchase of investments (0.49) (4.99)Preoperative expenses incurred (1.67) (0.47)Paid for acquisition of subsidiaries (3.39) (9.81)Sale / redemption of investments 0.65 1.60Inter-corporate deposits repaid / (granted) 3.18 (135.62)Interest received 24.65 20.94Dividends received 0.42 0.34
Net cash used in investing activities (380.46) (270.18)CASH FLOW FROM FINANCING ACTIVITIES
Redemption of preference share capital (100.00) –Proceeds from issuance of share capital including premium 1,364.89 200.00Share application money received 0.14 0.05Share issue expenses (40.67) (7.57)Proceeds from borrowings 578.39 341.63Repayment of borrowings (523.88) (214.41)Interest paid (50.16) (34.77)Dividends paid (84.99) (41.16)Tax on dividends paid (12.21) (5.34)
Net cash from financing activities 1,131.51 238.43NET INCREASE IN CASH AND CASH EQUIVALENTS 397.03 86.40Cash and cash equivalents at the beginning of the year 154.46 68.06Cash and cash equivalents at the end of the year 551.49 154.46Components of cash and cash equivalents
Cash and cheques on hand 1.34 0.64With banks
in current account 32.70 19.55in term deposit accounts 389.53 80.44
With non-scheduled banksin current account 127.92 53.83
551.49 154.46Notes:1. Purchase of fixed assets include payments for items in capital work-in-progress and advance for purchase of fixed assets.2. Previous year’s figures have been regrouped/reclassified, wherever necessary.
Consolidated cash flow statement for the year ended March 31, 2006 All amounts in rupees crore unless otherwise stated
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
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Particulars As at March 31,
2006 2005
SCHEDULE - A : SHARE CAPITAL
Authorised330,000,000 (101,000,000) equity shares of Rs. 10 each 330.00 101.0011,500,000 (11,500,000) preference shares of Rs. 100 each 115.00 115.00
445.00 216.00Issued, subscribedEquity287,531,380 (86,922,900 ) equity shares of Rs. 10 each fully paid up 287.53 86.92[Of the above Equity shares, 251,855,300 (78,009,500) shares were allottedas fully paid bonus shares by utilisation of Rs. 174.04 crore (Rs. 19.04 crore)from general reserve, Rs. 1.03 crore (Rs. 1.03 crore) from capital redemptionreserve and Rs. 76.80 crore (Rs. 57.95 crore) from securities premium account]Preference1,500,000 (1,500,000), 10% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - P, Note 6(a)(i)] 15.00 15.00Nil (10,000,000), 0.01% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - P, Note 6(a)(ii)] – 100.00
302.53 201.92
SCHEDULE - B : EMPLOYEE STOCK OPTIONS
Employee stock options outstanding 22.44 –Less: Deferred employee compensation expense outstanding 12.08 –
10.36 –
SCHEDULE - C : RESERVES AND SURPLUS
Capital reserve on consolidation 0.03 –
Securities premium accountAs per last balance sheet 29.85 –Add: Addition during the year 1,338.13 95.37Less: Capitalisation by way of issue of bonus shares 18.85 57.95Less: Share issue expenses [Net of tax benefit Rs. 2.56 crore (Rs. Nil)] 38.11 7.57
1,311.02 29.85General reserveAs per last Balance Sheet 170.85 70.85Add: Transfer from consolidated profit and loss account 300.00 100.00
470.85 170.85Less: Capitalisation by way of issue of bonus shares 155.00 –
315.85 170.85
Profit and loss account 794.81 501.662,421.71 702.36
SCHEDULE - D : SECURED LOANS
Term loansFrom banks and financial institutions [See Schedule - P, Note 6(c)(i)] 102.61 81.14From others [See Schedule - P, Note 6(c)(ii)] 151.79 53.12
254.40 134.26Working capital facilities from banks and financial institutionsRupee loans [See Schedule - P, Note 6(c)(iii)] 135.22 208.03Foreign currency loans [See Schedule - P, Note 6(c)(iii)] 0.16 13.31
135.38 221.34Vehicle loans 0.11 1.12(Secured against hypothecation of vehicles)
389.89 356.72
SCHEDULE - E : UNSECURED LOANS
Long termFrom other than banks 29.34 39.09
Short TermFrom other than banks 31.47 –
60.81 39.09
Schedules to the consolidated balance sheet as at March 31, 2006
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SUZLON ENERGY LIMITED
Sche
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Schedules to the consolidated balance sheet as at March 31, 2006
Particulars As at March 31,
2006 2005
SCHEDULE - G : INVESTMENTS
LONG TERM INVESTMENTS (At cost, fully paid)
UNQUOTED
Government and other securities (non-trade) 0.03 0.03Trade investments 6.00 6.65Other than trade investments 1.57 1.08
7.60 7.76
Aggregate cost of unquoted investments 7.60 7.76
SCHEDULE - H : CURRENT ASSETS, LOANS AND ADVANCES
Current assets
InventoriesRaw materials [including goods-in-transit Rs. 181.34 crore (Rs. 107.55 crore)] 1,038.67 459.13Semi-finished goods and work-in-progress 165.53 102.87Finished goods 40.33 3.10Land and land lease rights 39.41 10.47Stores and spares 0.76 –Projects work-in-progress 46.32 –
1,331.02 575.57Sundry debtors(Unsecured)Outstanding for a period exceeding six months
considered good [See Schedule - P, Note 6(e)] 205.29 108.62considered doubtful 6.22 10.39
211.51 119.01Others, considered good 1,442.02 584.27
1,653.53 703.28Less: Provision for doubtful debts 6.22 10.39
1,647.31 692.89Cash and bank balancesCash on hand 0.84 0.64Cheques in transit 0.50 –
Balances with scheduled banksin current accounts 32.70 19.55in term deposit accounts 389.53 80.44
422.23 99.99Balance with non-scheduled banks in current accounts 127.92 53.83
551.49 154.46Loans and advances(Unsecured and considered good, except otherwise stated)Deposits
with customers as security deposit 25.94 32.58others 82.18 7.90
Advance income-tax 12.74 0.74
Advances recoverable in cash or in kind or for value to be received*considered good 519.86 283.51considered doubtful 2.70 3.35
643.42 328.08Less: Provision for doubtful loans and advances 2.70 3.35
640.72 324.73
4,170.54 1,747.65* Include (a) Rs. Nil** (Rs. 0.43 crore) towards share application money pending allotment
(b) Intercorporate deposits of Rs. 185.45 crore (Rs. 188.64 crore)** Amount below Rs. 0.01 crore
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Schedules to the consolidated balance sheet as at March 31, 2006
Particulars As at March 31,
2006 2005
SCHEDULE - I : CURRENT LIABILITIES AND PROVISIONS
Current liabilities
Sundry creditors 702.70 459.12
Acceptances 22.59 61.46
Other current liabilities 217.70 37.97
Interest accrued but not due 1.36 0.76
Advances from customers 353.36 38.69
1,297.71 598.00Provisions
Wealth tax 0.02 0.01
Income-tax 1.80 7.08
Gratuity, superannuation and leave encashment 6.85 1.00
Generation guarantee, LD, operation, maintenance and warranty 317.08 159.62
Dividend 73.69 13.10
Tax on dividend 10.66 2.09
Fringe benefit tax 0.01 –
410.11 182.90
1,707.82 780.90
SCHEDULE - J : MISCELLANEOUS EXPENDITURE(To the extent not adjusted or written off)
Preliminary expenses
Opening balance 0.41 0.21
Add: Addition during the year 0.62 0.38
Less: Written off during the year 0.18 0.18
0.85 0.41
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Particulars Year ended March 31,
2006 2005
SCHEDULE - K : OTHER INCOME
Interest received
From banks 16.18 3.54From others 14.99 14.56
Dividends 0.42 0.34
Excess provision written back – 0.30
Sale of sales-tax entitlement – 2.99
Infrastructure development income 8.15 0.10
Miscellaneous income 15.90 1.60
55.64 23.43
SCHEDULE - L : COST OF GOODS SOLD
Consumption of raw material
Opening stock 459.13 170.37Add: Purchases 2,928.21 1,476.07
3,387.34 1,646.44Less: Closing stock 1,038.67 459.13
(A) 2,348.67 1,187.31
Trading purchases (B) 113.10 16.07
(Increase) / Decrease in stocks
Opening balance
Semi-finished goods and work-in-progress 102.87 30.37
Finished goods 3.10 19.30
Land and land lease rights 10.47 1.08
(C) 116.44 50.75Closing balance
Semi-finished goods and work-in-progress 165.53 102.87
Finished goods 40.33 3.10
Land and land lease rights 39.41 10.47
(D) 245.27 116.44
(Increase) / Decrease in stock (C) - (D) = (E) (128.83) (65.69)
Less: Transfer to designs and drawings (F) 23.86 –
(A) + (B) + (E) - (F) 2,309.08 1,137.69
Schedules to the consolidated profit and loss account for theyear ended March 31, 2006
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Schedules to the consolidated profit and loss account for theyear ended March 31, 2006
Particulars Year ended March 31,
2006 2005
SCHEDULE - M : OPERATING AND OTHER EXPENSES
Stores and spares 17.78 7.01Power and fuel 4.07 1.25Factory expenses 16.70 2.58Repairs and maintenance:
Plant and machinery 1.48 0.45Building 1.93 1.47Others 3.06 1.72
Design change and technological upgradation charges 5.16 3.28Operation and maintenance charges 14.67 7.03Other manufacturing and operating expenses 0.46 0.39Insurance 5.96 3.11Quality assurance expenses 16.56 8.60R & D, certification and product development 1.77 3.40Rent 9.15 4.98Rates and taxes 5.12 0.66Provision for operation, maintenance and warranty 85.77 57.84Provision for power generation guarantee 106.51 45.07Advertisement and sales promotion 15.55 6.10Infrastructure development expenses 0.01 14.63Freight outward and packing expenses 79.64 24.59Sales commission 23.25 9.78Travelling, conveyance and vehicle expenses 33.52 16.02Communication expenses 5.55 2.66Auditors' remuneration 3.04 1.26Consultancy charges 16.19 7.87Charity and donations 2.11 5.17Other selling and administrative expenses 32.76 23.35Exchange differences, net 3.27 3.65Provision for doubtful debts and advances 0.57 9.33Loss on sale of investment – 0.01Loss on assets sold / discarded, net 0.53 0.48
512.14 273.74
SCHEDULE - N : EMPLOYEES' REMUNERATION AND BENEFITS
Salaries, wages, allowances and bonus 112.60 55.08Contribution to provident and other funds 3.64 2.24Staff welfare expenses 5.34 4.47
121.58 61.79
SCHEDULE - O : FINANCIAL CHARGES
Interest:
Fixed loans 12.92 12.02Others 37.84 23.24
Bank charges 14.01 10.57
64.77 45.83
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SCHEDULE - P : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OFSUZLON FOR THE FINANCIAL YEAR ENDED MARCH 31, 2006All amounts in rupees crore unless otherwise stated
1. Basis of preparation of consolidated financial statements
The accompanying consolidated financial statements are prepared under the historical cost convention, on an accrual basis
of accounting in conformity with accounting principles generally accepted in India, to reflect the financial position of the
Company and its subsidiaries.
2. Principles of consolidation
The consolidated financial statements relate to Suzlon Energy Limited (the Company) and its subsidiaries (together referred to
as Suzlon or the Group). The consolidated financial statements have been prepared on the following basis:
(a) The financial statements of the Company and its subsidiaries have been combined on a line-by-line basis by adding
together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra group
balances and intra group transactions. The unrealised profits or losses resulting from the intra group transactions have
been eliminated as per Accounting Standard-21 Consolidated Financial Statements issued by the Institute of Chartered
Accountants of India (ICAI).
(b) The excess of the cost to the Company of its investment in the subsidiaries over the Company's portion of equity on the
acquisition date is recognised in the financial statements as Goodwill. The Company's portion of the equity in the
subsidiaries at the date of acquisition is determined after realigning the material accounting policies of the subsidiaries
to that of the parent and adjusting the charge / (reversal) on account of realignment to the accumulated reserves and
surplus of the subsidiaries at the date of acquisition.
(c) The consolidated financial statements are prepared using uniform accounting policies for like transactions and other
events in similar circumstances and necessary adjustments required for deviations, if any, are made in the consolidated
financial statements and are presented in the same manner as the Company's standalone financial statements.
3. Significant accounting policies
(a) Use of estimates
The presentation of financial statements in conformity with the generally accepted accounting principles requires
estimates and assumptions to be made that may affect the reported amount of assets and liabilities and disclosures
relating to contingent liabilities as at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those estimated.
(b) Revenue recognition
Sale of goods
Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods are
transferred to the customer, as per the terms of the respective sales order.
Power generation income
Power generation income is recognised on the basis of electrical units generated, net of wheeling and transmission
loss, as applicable, as shown in the power generation reports issued by the concerned authorities.
Sales-tax entitlement
Revenues on account of sale of Sales-Tax Entitlement Certificates are recognised as per the terms of agreement/
arrangement with the concerned parties.
Service and maintenance income
Revenue from annual service and maintenance contracts is recognized on the proportionate basis for the period forwhich the service is provided net of taxes.
Lease rental income
Lease rental income is recognized on accrual basis taking into consideration the data and facts available upon whichthe computation of lease rent depends.
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Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rateapplicable. In case of interest charged to customers, interest is accounted for on availability of documentary evidencethat the customer has accepted the liability.
Dividend
Dividend income from investments is recognised when the right to receive payment is established.
(c) Fixed assets
Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost includes all expenditurenecessary to bring the asset to its working condition for its intended use. Own manufactured assets are capitalisedinclusive of all direct costs and attributable overheads. Capital work-in-progress comprises of advances paid to acquirefixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date. In thecase of new undertaking, pre-operative expenses are capitalised upon the commencement of commercial production.
The carrying amount of the assets belonging to each Cash Generating Unit (CGU) are reviewed at each balance sheetdate to assess whether they are recorded in excess of their recoverable amounts, and where carrying amounts exceedthe recoverable amount of the assets' CGU, assets are written down to their recoverable amount. Further, assets held fordisposal are stated at the lower of the net book value or the estimated net realisable value.
(d) Intangible assets
Research and development costs
Development cost incurred on an individual project is carried forward when its future recoverability can reasonably beregarded as assured. Any expenditure carried forward is amortized over the period of expected future sales from therelated project, not exceeding five years.
The carrying value of development costs is reviewed for impairment annually when the asset is not in use, andotherwise when events and changes in circumstances indicate that the carrying value may not be recoverable.
Intangible assets are recorded at the consideration paid for their acquisition. Cost of an internally generated assetcomprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating,producing and making the asset ready for its intended use.
(e) Depreciation / Amortisation
Depreciation / Amortisation is provided on the Written Down Value method (WDV) unless otherwise mentioned, pro-rata to the period of use of assets and is based on management's estimate, of useful lives of the fixed assets or at ratesspecified in Schedule XIV to the Companies Act 1956 (the Act), whichever is higher:
Type of asset Rate
Goodwill Amortised on a straight line basis over a period of ten yearsLeasehold land Amortised over the period of leaseOffice building 5%Factory building 10%Plant and machinery
Single shift 13.91%Double shift 20.87%Triple shift 27.82%
Wind turbine generators 15.33%Moulds 13.91% or Useful life based on usagePatterns 30% or Useful life based on usagePlugs for moulds 50% or Useful life based on usageWind research and measuring equipment 50%Computers and software 40%Office equipment 13.91%Furniture and fixture 18.10%Motor car and others 25.89%Trailers 30%Intangible assets Amortised on a straight line basis over a period of five years
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(f) Inventories
Inventories of raw materials including stores, spares and consumables, packing materials; semi-finished goods; work inprogress and finished goods are valued at the lower of cost and estimated net realisable value. Cost is determined onweighted average basis.
The cost of work-in-progress, semi-finished goods and finished goods includes the cost of material, labour andmanufacturing overheads.
Inventories of traded goods are stated at the lower of the cost and net realizable value.
Stock of land and land lease rights is valued at lower of cost and net realisable value. Cost is determined based onweighted average basis. Net realisable value is determined by the management using technical estimates.
(g) Investments
Long Term Investments are carried at cost. However, provision is made to recognise a decline, other than temporary, inthe value of long term investments.
Current investments are carried at the lower of cost and fair value, determined on an individual basis.
(h) Foreign currency transactions
Transactions in foreign currencies are normally recorded at the average exchange rate prevailing in the month duringwhich the transaction occurred. Outstanding balances of foreign currency monetary items are reported using theperiod end rates.
Non-monetary items carried in terms of historical cost denominated in a foreign currency are reported using the exchangerate at the date of the transaction; and non–monetary items which are carried at fair value or other similar valuationdenominated in a foreign currency are reported using the exchange rate that existed, when the values were determined.
Exchange differences arising as a result of the above are recognised as income or expense in the profit and loss account,except in case of liabilities incurred for acquiring imported fixed assets, where the differences are adjusted to thecarrying amount of such fixed assets in compliance with the Schedule VI of the Act.
In case of forward contracts, the difference between the forward rate and the exchange rate, being the premium ordiscount, at the inception of a forward exchange contract is recognized as income or expense over the life of thecontract. Exchange differences on such contracts are recognised in the profit and loss account in the reporting periodin which the rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract isrecognised as income or as expense for the period.
The financial statements of integral foreign operations are translated as if the transactions of the foreign operationshave been those of the Company itself. In case of the Foreign Subsidiaries, revenue items are consolidated at theaverage rate prevailing during the year. All the monetary assets and liabilities are converted at the rates prevailing atthe end of the year. Non-monetary items like fixed assets and inventories, are converted at the average rate prevailingin the month during which the transaction occurred.
(i) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets arecapitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of timeto get ready for intended use. All other borrowing costs are charged to revenue.
(j) Retirement and other employee benefits
Defined contributions to provident fund and family pension fund are charged to the profit and loss account on accrualbasis.
Liabilities with regard to gratuity, where applicable, are determined under Group Gratuity Scheme with Life InsuranceCorporation of India (LIC) and the provision required is determined as per actuarial valuation carried out by LIC, as atthe balance sheet date.
Contributions to Superannuation Fund with LIC through its employees' trust are charged to the profit and loss accounton an accrual basis.
The provision in the books for unutilised leave lying to the credit of employees, subject to the maximum period ofleave, are made on the basis of actuarial valuation as at the balance sheet date.
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(k) Provisions, contingent liabilities and contingent assets
A provision is recognised when there is a present obligation as a result of past events and it is probable that an outflowof resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisionsare not discounted to their present value and are determined based on best estimate required to settle the obligationat the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current bestestimates.
Contingent Liabilities are disclosed by way of notes to the accounts.
Contingent assets are not recognized.
(l) Income-tax
Tax expense for a year comprises of current tax, deferred tax and fringe benefit tax. Current tax is measured after takinginto consideration, the deductions and exemptions admissible under the provisions of applicable laws.
Deferred tax reflects the impact of current year timing differences between taxable income and accounting incomefor the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates andthe tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to theextent that there is reasonable certainty that sufficient future taxable income will be available against which suchdeferred tax assets can be realised. If the Company has carry forward of unabsorbed depreciation and tax losses,deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets can be realisedagainst future taxable profits. Unrecognised deferred tax assets of earlier years are reassessed and recognised to theextent it has become reasonably certain that future taxable income will be available against which such deferred taxassets can be realised.
Deferred tax resulting from timing differences which originate during the tax holiday period but are expected toreverse after tax holiday period is recognised in the year in which the timing differences originate using the tax ratesand laws enacted or substantively enacted by the balance sheet date.
(m) Lease assets
Operating leases
Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating lease. Lease rentals are charged off to the profit and loss account as incurred. Initial direct costsin respect of assets given on lease are expensed off in the year in which such costs are incurred.
(n) Earnings per share
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders (afterdeducting preference dividends and attributable taxes) by the weighted average number of equity shares outstandingduring the period. The weighted average number of equity shares outstanding during the period are adjusted for any bonusshares issued during the year and also after the balance sheet date but before the date the financial statements are approvedby the board of directors.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholdersand the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutivepotential equity shares.
The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares as appropriate. Thedilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value.Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.
(o) Employee stock option
Stock options granted to employees under the Employees Stock Option Scheme are accounted as per the intrinsic valuemethod permitted by the “Guidance Note on Share Based Payments” issued by the ICAI. Accordingly, the excess of themarket price of the shares as on the date of the grant of options over the exercise price is recognised as deferredemployee compensation and is charged to profit and loss account on straight-line basis over the vesting period.
The number of options expected to vest is based on the best available estimate and are revised, if necessary, if subsequentinformation indicates that the number of stock options expected to vest differs from previous estimates.
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4. Changes in accounting policies
During the current year, Suzlon Energy Limited has changed the basis of valuation of inventories from First-In-First-Out(FIFO) to Weighted Average basis. As a result of this change, the value of the inventory as at March 31, 2006 is higher by Rs.2.67 crore and the profit before tax for the year is higher by a similar amount.
5. The list of subsidiary companies which are included in the consolidation and the Company's effective holdings thereinare as under:
Name of the subsidiary Country of Effective ownershipincorporation in subsidiaries as at March 31,
2006 2005
AE-Rotor Holding B.V. Netherlands 100% 100%
AE-Rotor Techniek B.V. Netherlands 100% 100%
Suzlon Energy B.V. Netherlands 100% 100%
Suzlon Energy A/S Denmark 100% 100%
Suzlon Wind Energy Corporation USA 100% 100%
Cannon Ball Wind Energy Park-I, LLC USA 100% 100%
Suzlon Energy Australia Pty. Limited Australia 100% 100%
Suzlon Energy GmbH Germany 100% 100%
Suzlon Windfarm Services Limited India 100% 100%
Suzlon Towers & Structures Limited India 100% 100%(Formerly known as Suzlon Green Power Limited)
Suzlon Generators Private Limited India 74.91% 74.91%
Suzlon Structures Private Limited India 75% 75%
Windpark Olsdorf WATT GmbH & Co KG Germany 100% –
Suzlon Windpark Management GmbH Germany 100% –
Suzlon Windkraft GmbH (Formerly Constellation GmbH) Germany 100% –
Suzlon Rotor Corporation USA 100% –
Suzlon Power Infrastructure Private Limited India 100% –
Suzlon Energy (Tianjin) Limited China 100% –
SE Drive Techniek GmbH Germany 100% –
Suzlon Gujarat Wind Park Limited India 100% –
Suzlon Engitech Private Limited India 100% –(Formerly Sarjan Engitech Private Limited)
As the operation of Suzlon Energy Limited, Mauritius (a wholly owned subsidiary) were not material in relation to the sizeof the consolidated operations, the financial statements of the subsidiary did not form part of the consolidated financialstatements.
6. Other notes
(a) Terms of redemption / conversion of preference shares of the Company:
(i) 1,500,000, 10% Cumulative redeemable preference shares of Rs. 100 each fully paid are redeemable at par afterone year from March 10, 2004, which is the date of allotment, at the option of the Company or the preferenceshareholders, as the case may be.
(ii) During the year, the Company has redeemed the 10,000,000, 0.01% cumulative redeemable preference shares ofRs. 100 out of the Initial Public Offer proceeds.
(b) 29,700 and 220,300, 8% Cumulative redeemable preference shares of Rs. 100 each fully paid of Suzlon Structures PrivateLimited (SSPL) are redeemable at par after one year from March 29, 2005 and June 28, 2005, being the respective datesof allotment, at the option of SSPL or of the Preference Shareholders as the case may be. This portion represents theholding by the external shareholders of SSPL only, other than the Holding Company.
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(c) The details of security for the secured loans in consolidated financial statements are as follows:
(i) Term loans from banks and financial institutions
Rs. 7.22 crore (Rs. 1.49 crore) secured by charge on certain WTG's, land and personal guarantee of directors.
Rs. 5.75 crore (Rs. 6.72 crore) secured by way of hypothecation of stocks and debtors and on specific receivables.
Rs. 28.54 crore (Rs. Nil) secured by way of hypothecation of all plant and machinery and other fixed assetsand second charge on all current assets.
Rs. 31.21 crore (Rs. 28.13 crore) secured by way of first charge on certain immovable and moveable fixedassets, second charge on current assets and personal guarantee of directors.
Rs. 25.28 crore (Rs. 15.38 crore) secured by a first charge on certain immovable and movable fixed assets,second charge on current assets and personal guarantees of directors in certain cases.
Rs. 4.61 crore (Rs. 12.02 crore) secured by way of hypothecation of certain windfarm projects and mortgageof land.
Rs. 14.33 crore (Rs. 17.41 crore) secured by way of charge on certain WTG's and land appurtenant theretoand personal guarantee of directors.
(ii) Term loans from others
Secured by a first charge on certain immovable and movable fixed assets, specific security deposits, book debts,second charge on current assets and personal guarantees of directors in certain cases.
(iii) Working capital facilities from banks and financial institutions
Rupee loans
Rs. 114.03 crore (Rs. 202.85 crore) secured by hypothecation of inventories, book-debts and other currentassets, both present and future, first charge on certain immovable fixed assets, second charge on all otherimmovable fixed assets and personal guarantees of directors in certain cases.
Rs. 5.87 crore (Rs. Nil) secured by hypothecation of all current assets and second charge on fixed assets.
Rs. 15.48 crore (Rs. 5.18 crore) secured by way of hypothecation of inventories, book debts and othercurrent assets, both present and future, second charge on all other immovable fixed assets and personalguarantee of directors.
Foreign currency loans
Rs. 0.16 crore (Rs. 0.18 crore) is secured by way of mortgage of office building at Pipestone, USA.
Further out of the above, term loans from banks and financial institutions amounting to Rs. 53.57 crore (Rs. 62.41 crore)
and working capital facilities from banks and financial institutions amounting to Rs. 119.51 crore (Rs. 221.12 crore) are
secured by personal guarantee of directors.
(d) Sales do not include excise duty, service tax, sales-tax or VAT charged.
(e) Balances of sundry debtors include Rs. 0.85 crore (Rs. 22.48 crore), which are contractually payable beyond a period
of six months from the date of sale.
(f) Operating leases
Premises
Suzlon has taken certain premises under cancellable operating leases. The total rental expense under cancellable
operating leases during the period was Rs. 3.85 crore (Rs. 1.73 crore).
The Group have also taken furnished / non-furnished offices and certain other premises under non-cancellable operating
lease agreement ranging for a period of one to five years. The lease rental charge during the year is Rs. 5.30 crore
(Rs. 1.77 crore) and maximum obligation on long term non-cancellable operating lease payable as per the rentals stated
in respective agreement are as follows:
Obligation on non-cancellable operating leases Amount
Not later than one year 6.36Later than one year and not later than five years 7.12Later than five years Nil
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(g) Employee stock option scheme
Suzlon Energy Employee Stock Option Plan 2005 (the 2005 Plan or the Scheme)
The Company instituted the 2005 Plan for all eligible employees in pursuance of a special resolution approved by the
shareholders at the extra-ordinary general meeting held on June 16, 2005 (Grant Date). The Scheme covers grant of
options to specified permanent employees of the Company as well as its subsidiaries except subsidiaries in the United
States of America.
Pursuant to the scheme, the Company has granted 921,000 options to eligible employees at an exercise price, which is
50% of the issue price determined in the Initial Public Offering (IPO) of the Company in accordance with SEBI
Guidelines i.e, Rs. 510 per equity share. Under the terms of the Scheme, 30% of the options will vest in the employees
at the end of the first year, 30% at the end of the second year and the balance of 40% at the end of third year from the
grant date in the following manner:
Date of vesting Proportion ofvesting
June 16, 2006 30%June 16, 2007 30%June 16, 2008 40%
The employee stock options granted shall be capable of being exercised within a period of five years from the date of
first vesting i.e. June 16, 2006. Once the options vest as per the Schedule above, they would be exercisable by the
option holder and the shares arising on exercise of such options shall not be subject to any lock-in period. Further, in
the case of termination of employment, all non-vested options would stand cancelled. Options that have vested but
have not been exercised can be exercised within the time prescribed as mentioned above, failing which they would
stand cancelled.
During the year ended March 31, 2006, no eligible employees have exercised their options as the date of first vesting
falls in the succeeding year. Further, 32,000 options were forfeited as certain employees resigned from the services ofthe Company. The movement in the stock options during the year was as per the table below:
Options outstanding at the beginning of the year NilGranted during the year 921,000Forfeited during the year 32,000Exercised during the year NilExpired during the year NilOptions outstanding at the end of the year 889,000Exercisable at the end of the year Nil
Fair value of the option
The Company has charged a sum of Rs. 10.36 crore (Rs. 255 per option) being the intrinsic value of option under the2005 Plan for the year ended March 31, 2006. Had the Company adopted the fair value method based on “Black-Scholes” Model for pricing and accounting the options, the cost of option would have been Rs. 324.33 per option andaccordingly, the profit after tax would have been lower by Rs. 2.82 crore. Consequently the diluted earnings per shareafter factoring the above impact of fair value would have been Rs. 27.69 per share instead of Rs. 27.68 per share.
(h) Provisions
In pursuance of Accounting Standard-29 (AS-29) “Provisions, Contingent Liabilities and Contingent Assets” issued by theICAI, the provisions required have been incorporated in the books of accounts in the following manner:
Particulars Generation Operation, Provision forguarantee maintenance liquidated
and warranty damages
Opening balance 57.98 97.67 3.97Additions net of utilisation 83.47 75.23 0.00(Reversal) (1.24)
Closing balance 141.45 172.90 2.73
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The provision for operation, maintenance and warranty represents the expected liability on account of field failure ofparts of WTG and expected expenditure of servicing the WTG's over the period of free operation, maintenance andwarranty, which varies according to the terms of each sales order.
The provision for Generation Guarantee (GG) represents the expected outflow of resources against claims for generationshortfall expected in future over the life of the guarantee assured. The period of GG varies for each customer accordingto the terms of the contract. The key assumptions in arriving at the GG provision are wind velocity, plant load factor,grid availability, load shedding, historical data, wind variation factor, etc.
Provision for Liquidated Damages (LD) represents the expected claims which the Company may need to pay for nonfulfilment of certain commitments as per the terms of the sales order. These are determined on a case to case basisconsidering the dynamics of each individual sales order and the factors relevant to that sale.
7. Break up of the accumulated deferred tax asset, net, is given below:
Particulars Deferred tax asset / (liability)as at March 31,
2006 2005
Deferred tax assets
Provision for generation guarantee, LD and operation, maintenance and warranty 54.61 28.52Provision for doubtful debts 1.56 2.18Unabsorbed losses 33.56 4.15Unabsorbed depreciation – 3.50Others 0.15 0.30
(a) 89.88 38.65
Deferred tax liabilityDepreciation on fixed assets 10.54 14.54
(b) 10.54 14.54
Deferred tax asset (net) (c) = (a) - (b) 79.34 24.11Tax effect of share issue expenses eligible for income-taxdeduction under Section 35D, credited to securitiespremium account (d) 2.42
(c) + (d) 81.76 24.11
Note:
During the year, the Company acquired the entire share capital of Suzlon Engitech Private Limited (SEPL), Suzlon Power Infrastructure PrivateLimited (SPIPL) and Suzlon Gujarat Wind Park Limited (SGWPL), whose balances since date of their acquisition have been consolidated in thebooks of Suzlon Energy Limited. The deferred tax assets (net) of SPIPL and SGWPL as at March 31, 2005 amounting to Rs. Nil andRs. 0.08 crore, respectively and the deferred tax assets (net) of SEPL as at June 30, 2005 amounting to Rs. 0.06 crore have been consolidated.
8. Estimated amount of contracts remaining to be executed on capital accounts and not provided for, net of advances.Rs. 97.86 crore (Rs. 32.37 crore).
9. Managerial remuneration to directors
Particulars Year ended March 31,
2006 2005
Salaries 1.47 0.86Perquisites – 0.60Contribution to superannuation fund 0.31 0.18Sitting fees 0.01 –
1.79 1.64
The directors are covered under the Company's scheme for gratuity along with the other employees of the Company. Theproportionate amount of gratuity is not included in the aforementioned disclosure, as the amount attributable to directorsis not ascertainable.
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10. Earnings Per Share (EPS)All amounts in Rs. crore except per share data
Particulars Year ended March 31,
2006 2005
Basic earnings per share
Net profit 759.50 365.33
Less:Preference dividend and tax thereon 1.90 3.24
(a) Net Profit attributable to equity shareholders(Numerator for computation of basic and diluted EPS) 757.60 362.09
(b) Weighted average number of equity shares in calculating basic EPS(Denominator for computation of basic EPS) 273,233,510 253,005,661
Add: Equity shares for no consideration arising on grant ofstock options under ESOP 2005 430,697 –
(c) Weighted average number of equity shares in calculating diluted EPS(Denominator for diluted EPS) 273,664,207 253,005,661
Basic earning per share of face value of Rs. 10 each (a/b *10,000,000) 27.73 14.34
Diluted earning per share of face value of Rs. 10 each (a/c*10,000,000) 27.68 14.34
11. Contingent liabilities
Particulars As at March 31,
2006 2005
Guarantees given on behalf of other companies in respect of loansgranted to them by banks 0.88 1.40
Counter guarantees given to the banks against guarantees issued bybanks on Company's behalf 0.25 1.93
Claims against the Company not acknowledged as debts 0.25 1.75
Bills discounted with banks – 3.33
Disputed labour cost liabilities 0.01 0.02
Disputed service tax liabilities 0.87 0.87
Bonds / undertakings given by the Company under duty exemptionscheme to customs authorities 5.66 5.18
12. Derivative instruments and unhedged foreign currency exposure
Particulars of derivatives Purpose
Forward contract outstanding as at balance sheet date
Buy DKK 386,239.60 Hedge of forex DKK liabilitiesBuy Euros 5,677,739.50 Hedge of forex Euro liabilitiesBuy USD 68,348,272.54 Hedge of forex USD liabilities
Target redemption forward contractEuro 0.025 crore / Euro 0.05 crore per week for 18 weeks Hedge forex Euro liabilities
Range accrual interest rate swap
USD 0.20 crore Hedge against interest on forex loans
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Particulars of unhedged foreign currency exposure as at the consolidated balance sheet date
Particulars Amount
Creditors (including goods in transit Rs. 133.76 crore) 243.47Debtors 24.32Loans given 47.20Loans received 82.00Bank balance in current accounts and term deposit accounts 4.45
13. Related party disclosures
(a) Related parties with whom transactions have taken place during the year.
(i) Associates
Suzlon Infrastructure Limited (Formerly known as Suzlon Developers Limited), Sarjan Realities Limited.
(ii) Entities where Key Management Personnel (KMP) / Relatives of Key Management Personnel (RKMP) has significantinfluence
Suzlon Capital Limited, Suzlon Hotels Limited, Sarjan Infrastructure Finance Limited, Shubh Realty (South) PrivateLimited, Sugati Holdings Private Limited and Kush Synthetics Private Limited.
(iii) Key Management Personnel
Tulsi R. Tanti, Girish R. Tanti, Vinod R. Tanti and Balrajsinh A. Parmar (See note below).
(iv) Relatives of Key Management Personnel
Gita T. Tanti, Rambhaben Ukabhai, Pranav T. Tanti, Nidhi T. Tanti, Vinod R. Tanti, Jitendra R. Tanti, Sangita V. Tanti,Lina J. Tanti, Esha G. Tanti, Sheela B. Parmar, Ranjitsinh A. Parmar, Amarsinh A. Parmar, Kiritsinh A. Parmar.
(v) Employee funds
Suzlon Energy Limited - Superannuation FundSuzlon Energy Limited - Employees Group Gratuity SchemeSuzlon Windfarm Services Limited - Superannuation FundSuzlon Windfarm Services Limited - Employees Group Gratuity SchemeSuzlon Towers and Structures Limited - Superannuation Fund(Formerly Suzlon Green Power Limited)
Note:
Vinod R. Tanti and Balrajsinh A. Parmar have been Directors of the Company till June 30, 2005, and have not been considered askey management personnel post June 30, 2005.
(b) Transactions between the Group and related parties and the status of outstanding balances as at March 31, 2006
Particulars Associate Entities KMP RKMP Employeewhere fundsKMP /
RKMP hassignificantinfluence
Transactions
Purchase of fixed assets 0.31 – – – –(0.04) – – – –
Sale of fixed assets – – – – –(0.02) – (0.16) (0.10) –
Subscription to / purchase – – – – –of preference shares (5.00) (0.13) (2.45) (2.79) –
Subscription to / purchase – – 0.03 0.35 –of equity shares – – (1.54) (3.97) –
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(b) Transactions between the Group and related parties and the status of outstanding balances as at March 31, 2006(Contd.)
Particulars Associate Entities KMP RKMP Employeewhere fundsKMP /
RKMP hassignificant
influence
Sale of investments 0.65 – – – –– (1.24) – – –
Loans / Deposit given 204.02 – – – –(444.57) (0.03) – – –
Sale of goods 54.69 – – – –(36.12) – – – –
Purchase of goods and 19.93 0.07 – – –services (15.47) (3.74) – (0.18) –
Services rendered, – – – – –compensation and reimbursement (1.35) (0.02) – – –
Interest received 10.77 – – – –(11.10) (0.05) – – –
Dividend received / accrued 0.42 – – – –(0.21) – – – –
Dividend paid – 8.90 7.59 44.20 –– (4.21) (4.27) (24.55) –
Rent received – – – – –(0.05) – – – –
Rent / Hotel charges paid – 0.03 0.01 – –– (0.41) (0.00)* – –
Managerial remuneration – – 1.78 – –– – (1.63) – –
Contribution to various funds – – – – 2.56– – – – (1.59)
Outstanding balances
Investments 6.00 0.87 – – –(6.65) (0.87) – – –
Sundry debtors 19.06 – – – –(11.25) – – (0.01) –
Loans / Deposits outstanding 184.82 – – – –(186.14) (3.92) – – –
Advances / Deposits to supplier 0.01 – – – –– (1.73) – – –
Sundry creditors 8.08 0.01 – – –(0.20) (0.18) – – (0.45)
Corporate guarantees 0.88 – – – –(1.40) – – – –
Contribution payable to various funds – – – – –– – – – (0.02)
* amount below Rs. 0.01 crore
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(c) Disclosure of significant transactions with related parties
Type of the transaction Type of Name of the entity /Person Year ended March 31,relationship 2006 2005
Purchase of fixed assets Associate Sarjan Realities Limited 0.31 0.04
Sale of fixed assets KMP Girish R. Tanti – 0.16
RKMP Ranjitsinh A. Parmar – 0.06
RKMP Amarsinh A. Parmar – 0.04
Subscription to / purchase Associate Suzlon Infrastructure Limited – 5.00of preference shares
RKMP Gita T. Tanti 0.05 –
RKMP Jitendra R. Tanti 0.02 –
RKMP Leena J. Tanti 0.05 –
RKMP Pranav Tanti 0.05 –
RKMP R.V. Tanti 0.05 –
RKMP Sangita V. Tanti 0.05 –
Sale of investments Entities where Sarjan Infrastructure Finance Limited – 1.24KMP / RKMPhas significantinfluence
Associate Suzlon Infrastructure Limited 0.65 –
Loan / Deposits given Associate Suzlon Infrastructure Limited – 206.41
Associate Sarjan Realities Limited 120.50 223.77
Associate Shubh Realty (South) Private Limited 70.22 –
Sale of goods Associate Sarjan Realities Limited 16.81 –
Associate Suzlon Infrastructure Limited 37.86 36.12
Services rendered, Associate Suzlon Infrastructure Limited – 1.31compensation andreimbursement
Purchase of goods and Associate Suzlon Infrastructure Limited 16.61 15.44services
Interest received Associate Sarjan Realities Limited 5.94 7.81
Associate Suzlon Infrastructure Limited 1.31 3.15
Associate Shubh Realty (South) Private Limited 3.48 –
Dividend received / accrued Associate Suzlon Infrastructure Limited 0.29 0. 08
Associate Sarjan Realities Limited 0.13 0.13
Dividend paid Entities where Suzlon Capital Limited – 0.02KMP/ RKMPhas significantinfluence
Rent received Associate Suzlon Infrastructure Limited – 0.05
Rent / Hotel charges paid Entities where Suzlon Hotels Limited 0.03 0.17KMP / RKMPhas significantinfluence
Entities where Suzlon Engitech Private Limited – 0.24KMP / RKMPhas significantinfluence
RKMP Girish R. Tanti 0.01 –
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(c) Disclosure of significant transactions with related parties (Contd.)
Type of the transaction Type of Name of the entity /Person Year ended March 31,relationship 2006 2005
Contribution to various funds Employee Suzlon Energy Limited - 1.28 0.90Funds Superannuation Fund
Employee Suzlon Energy Limited - 1.21 0.45Funds Employees Group Gratuity Scheme
Employee Suzlon Wind Farm Services Limited - – 0.11Funds Superannuation Fund
Employee Suzlon Wind Farm Services Limited - – 0.09Funds Employees Group Gratuity Scheme
Employee Suzlon Tower and Structures Limited - 0.02 0.05Funds Superannuation Fund
Employee Suzlon Power Infrastructure 0.03 –Funds Private Limited - Superannuation Fund
Suzlon Power Infrastructure 0.02 –Private Limited - Employees GroupGratuity Scheme
Managerial remuneration KMP Tulsi R. Tanti 1.17 0.44
KMP Girish R. Tanti 0.41 0.39
KMP Vinod R. Tanti 0.10 0.39
KMP Balrajsinh A. Parmar 0.10 0.41
14. Disclosure as required by Clause 32 of Listing Agreement with stock exchanges
Type of relationship Name Amount Maximumoutstanding Amount
as at outstandingMarch 31, 2006 during the year
Associates Sarjan Realities Limited 112.42 114.54Suzlon Infrastructure Limited – 75.00(Formerly Suzlon Developers Limited)
Where control of Sarjan Infrastructures Finance Limited 2.18 4.93KMP / RKMP exists Shubh Realty (South) Private Limited 70.22 70.22
Note:
(a) All the above balance of loans are excluding accrued interest aggregating Rs. 1.41 crore and are payable on demand.
(b) No loans have been granted by Suzlon Energy Limited to any person, who has invested in the shares of Suzlon Energy Limited or anyof its subsidiaries.
(c) There are no balances outstanding from Companies under the same management, as per the provisions of Section 370 (1B) of theCompanies Act, 1956.
15 Segment reporting
Suzlon's operations primarily relate to manufacture and sale of WTG's and its parts. Others primarily consist of operation andmaintenance revenue from the sale of WTG and power generation revenue from own installed WTG's.
The accounting principles consistently used in the preparation of the financial statements are also consistently appliedto record income and expenditure in individual segments. These are as set out in the Note on Significant AccountingPolicies.
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SUZLON ENERGY LIMITED
(a) Primary business segment
Particulars Year ended March 31, 2006 Year ended March 31, 2005
Sale of Others Elimina- Total Sale of Others Elimina- TotalWTG tions WTG tions
Total external sales 3,758.56 82.47 – 3,841.03 1,916.52 25.96 – 1,942.48
Add: Inter segment sales 2.37 8.28 (10.65) – 2.35 24.99 (27.34) –
Segment revenue 3,760.93 90.75 (10.65) 3,841.03 1,918.87 50.95 (27.34) 1,942.48
Segment results 781.54 55.75 (10.65) 826.64 413.55 6.38 – 419.93
Add / (Less): Items toreconcile with profit asper profit and loss account
Add: Other income – – – 55.64 – – – 23.43
Less: Financial charges – – – (64.77) – – – (45.83)Preliminary exp W/Off – – – (0.18) – – – (0.18)
Profit before tax,minority interest – – – 817.33 – – – 397.35
Provision for
Income-tax – – – 110.47 – – – 48.97
Deferred tax – – – (56.82) – – – (16.74)
Fringe benefit tax – – – 3.16 – – – –
Total tax – – – 56.81 – – – 32.23
Profit before minority interest – – – 760.52 – – – 365.12Add: Share of (Profit)/loss of – – – (1.02) – – – 0.21
minority In subsidiary
Profit for the year – – – 759.50 – – – 365.33
Segment assets 3,695.27 366.44 – 4,061.71 1,667.68 118.02 – 1,785.70
Common assets – – – 841.57 – – – 302.09
Enterprise assets – – – 4,903.28 – – – 2,087.79
Segment liabilities 1,583.22 39.13 – 1,622.35 755.35 18.48 – 773.83
Common liabilities – – – 561.14 – – – 524.63
Enterprise liabilities – – – 2,183.49 – – – 1,298.46
Capital expenditure 417.02 22.79 – 439.81 143.47 51.31 – 194.78during the year
Segment depreciation 62.38 9.21 – 71.59 39.50 9.82 – 49.32
Non-cash expensesother than depreciation 0.11 0.07 – 0.18 0.14 0.04 – 0.18
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(b) Geographical segment
Particulars Year ended March 31, 2006 Year ended March 31, 2005
India USA Others Total India USA Others Total
Segment revenue 3,530.47 310.56 – 3,841.03 1,936.14 6.34 – 1,942.48
Segment assets 3,465.50 387.01 209.20 4,061.71 1,675.38 50.42 59.90 1,785.70
Capital expenditure 369.70 2.19 67.93 439.81 189.35 0.93 4.50 194.78incurred
16. All figures have been reported in rupees crore and have been rounded off to the nearest lakhs. Prior year amounts have beenreclassified wherever necessary to confirm with current year's presentation. Figures in the brackets are in respect of theprevious year.
Signatures to schedules 'A' to 'P'
As per our report of even date For and on behalf of the Board of Directors
For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director
Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director
Membership No. 46238 Membership No. 89802
Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006
Hemal A. KanugaCompany Secretary
SUZLON ENERGY LIMITED
5. All transfer deeds, requests for change of address, bank particulars /
mandates / ECS mandates, PAN should be lodged with Company’s
registrar and share transfer agents, Karvy Computershare Private
Limited, “Karvy House”, 46, Avenue 4, Street No.1, Banjara Hills,
Hyderabad - 500 034, in case of shares held in physical form on or
before July 7, 2006. The above details in respect of the shares held in
electronic form should be sent to the respective depository participants
by the shareholders well in time.
6. Members are requested to furnish the registrars / depository
participants, the name and branch of the bank and account number
to enable the Company to distribute dividend through Electronic Clearing
Services (ECS). In the absence of ECS facility with the shareholder’s
bank, the bank account details will be printed on the dividend warrants,
if available.
7. Profile of directors seeking re-appointment / appointment is provided
under Section “Board of Directors” of the report on corporate
governance, which forms an integral part of this Annual Report, as
stipulated under Clause 49 of the listing agreement with stock exchanges.
8. Corporate members intending to send their authorised representatives
to attend the meeting are requested to send a certified copy of the
board resolution authorising their representative to attend and vote
on their behalf at the meeting.
9. Members desirous of asking any questions at the Annual General
Meeting are requested to send in their questions so as to reach the
Company’s registered office atleast 7 days before the Annual General
Meeting so that the same can be suitably replied to.
10. Members / proxies are requested to bring their attendance slip along
with their copy of Annual Report to the meeting.
In terms of the provisions of Section 260 of the Companies Act,
1956, Mr. Ashish Dhawan holds office up to the ensuing Annual
General Meeting of the Company. The Company is in receipt
of a notice in writing pursuant to Section 257 of the Companies
Act, 1956 proposing the candidature of Mr. Ashish Dhawan for
the office of the director of the Company.
The Board recommends the appointment of Mr. Ashish Dhawan
as the director of the Company.
No other director except Mr. Ashish Dhawan is in any way
concerned or interested in the said resolution appointing Mr.
Ashish Dhawan as the director of the Company.
By order of the Board of Directors
Place : New Delhi Hemal A. Kanuga
Date : May 15, 2006 Company Secretary
Regd. Office:
“Suzlon”,
5, Shrimali Society
Near Shri Krishna Complex
Navrangpura
Ahmedabad – 380 009
Item No.6
Mr. V. Raghuraman was appointed as an Additional Director
of the Company with effect from October 29, 2005. In terms of
the provisions of Section 260 of the Companies Act, 1956, Mr.
V. Raghuraman holds office up to the ensuing Annual General
Meeting of the Company. The Company is in receipt of a notice
in writing pursuant to Section 257 of the Companies Act, 1956
proposing the candidature of Mr. V. Raghuraman for the office
of the director of the Company.
The Board recommends the appointment of Mr. V. Raghuraman
as the director of the Company.
No other director except Mr. V. Raghuraman is in any way
concerned or interested in the said resolution appointing Mr.
V. Raghuraman as the director of the Company.
Item No.7
Mr. Ashish Dhawan, who was earlier appointed as director in
the capacity of the representative / nominee of Chryscapital
III, LLC, Mauritius ceased to be the director in his capacity as
nominee / representative of Chryscapital III, LLC with effect
from December 22, 2005 on termination of the shareholders’
and subscription agreement as entered into by the Company
with the said Chryscapital III, LLC, Mauritius. Mr. Ashish Dhawan
was appointed as an Additional Director of the Company in
his individual capacity with effect from December 28, 2005.
Annexure to the notice
Explanatory statement
[Pursuant to Section 173(2) of the Companies Act, 1956]
Suzlon Notice final.pmd 6/25/2006, 5:11 AM2
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