ntpc prospectus november25 2013

7/23/2019 NTPC Prospectus November25 2013

1/637

PROSPECTUS

November 25, 2013

A MAHARATNA COMPANY

NTPC LIMITED(A Government of India Enterprise)

Our Company was originally incorporated in New Delhi on November 7, 1975 under the Companies Act, 1956 ( Companies Act 1956) as a private limited companyunder the name,National Thermal Power Corporation Private Limited. For information on changes in our Companysname and registered office, see Hi story and Certai n Corporate Matters on page 7

Registered and Corporate Office:NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodhi Road, New Delhi 110 003Tel:(+91 11) 2436 0100; Fax:(+91 11) 2436 1018;Website:www.ntpc.co.in; Executive Director & Company Secretary and Compliance Officer: Mr. A.K. Rastogi; Tel: (+91 11) 2436 0071;Fax: (+91 11) 2436 0241; E-mail:

[email protected]

THE PROMOTER OF OUR COMPANY IS THE PRESIDENT OF INDIA,ACTING THROUGH THE MINISTRY OF POWER, GOVERNMENT OF INDIA (GOI)

(MOP)

PUBLIC ISSUE BY NTPC LIMITED (COMPANY OR ISSUER OR NTPC) OF TAX-FREE SECURED REDEEMABLE NON-CONVERTIBLE BONDS OF FACE

VALUE OF 1,000 EACH, IN THE NATURE OF DEBENTURES HAVING TAX BENEFITS UNDER SECTION 10(15)(iv)(h) OF THE INCOME TAX ACT, 1961, AS

AMENDED (INCOME TAX ACT AND SUCH BONDS, BONDS), FOR AN AMOUNT AGGREGATING UP TO 1,000 CRORE (BASE ISSUE SIZE) WITH AN

OPTION TO RETAIN OVERSUBSCRIPTION UP TO 750 CRORE FOR ISSUANCE OF ADDITIONAL BONDS AGGREGATING TO A TOTAL OF UP TO 1,750

CRORE*, (ISSUE SIZE) IN FISCAL 2014 (ISSUE).

The Issue is being made under the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, as amended (SEBI Debt Regulations) andpursuant to Notification No. 61/2013.F.No.178/37/2013-(ITA.I) dated August 8, 2013 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, GoI(MoF)(CBDT Notification), by virtue of powers conferred on it under Section 10(15)(iv)(h) oftheIncome Tax Act.*In terms of the CBDT Notification, our Company is authorized to raise a minimum of 70.00% of the Issue Size, by way of public issue and during the process of the public issue(s), our

Company may also, at its discretion, raise Bonds through private placement route for an amount not exceeding 30.00% of the Issue Size, wherein suitable amount shall be earmarked for

sovereign wealth funds , pension and gratuity funds. In case our Company issues bonds through private placement route, the amount o f oversubscription that may be retained through

public issue shall stand reduced accordingly. Our Company shall ensure that bonds issued pursuant to the CBDT Notification through public issue route and private placement route in

fiscal 2014 shall, in aggregate, not exceed `1,750 crore.

GENERAL RISKS

Investors are advised to read the risk factors carefully before making an investment decision in relation to the Issue. For making an investment decision, investors must rely on their own examination ofour Company and the Issue, including the risks involved. Specific attention is invited to Risk Factors on page 13 and Materi al Developments on page 122. This document has not been and will notbe approved by any regulatory authority in India, including the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), any registrar of companies or any stock exchangein India.

ISSUERS ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Prospectus contains all information with regard to the Issuer and the Issue which is material in thecontext of the Issue that the information contained in this Prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressedherein are honestly held and that there are no other material facts, the omission of which makes this Prospectus as a whole or any such information or the expression of any such opinions or intentionsmisleading in any material respect.

CREDIT RATING

CRISIL Limited (CRISIL) has, by its letter (No. VK/CGS/NTPCLTD/JUN13/90014) dated June 3, 2013, assigned a rating of CRISIL AAA to the Bonds, and revalidated such rating by letter (No.VK/NTPCL/SN26294) dated November 8, 2013. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest creditrisk. These ratings are not a recommendation to buy, sell or hold securities, and investors should take their own decision. These ratings are subject to revision or withdrawal at any time by the assigningrating agency (ies) and should be evaluated independently of any other ratings. Further, ICRA Limited (ICRA)has, by its letter (No. D/RAT/2013-14/N3/2) dated July 16, 2013, assigned a rating of[ICRA] AAA (Stable) to the Bonds, and revalidated such rating by letter (No. D/RAT/2013-14/N3/3) dated November 8, 2013. Instruments with this rating are considered to have the highest degree of

safety regarding timely financing of obligations and carry lowest credit risk. For the rationale for these ratings, see Annexure B Credit Rating.

PUBLIC COMMENTS

The Draft Prospectus dated November 15, 2013 was filed with BSE Limited (BSE), being the Designated Stock Exchange, and the National Stock Exchange of India Limited (NSE) (togetherStock Exchanges) pursuant to Regulation 6(2) of the SEBI Debt Re gulations. The Draft Prospectus was uploaded by the Stock Ex changes on their respective websites, www.bseindia.com andwww.nseindia.com, and was open for public comments for 7 Working Days fro m the date of filing of the Draft Prospectus.

LISTINGThe Bonds are proposed to be listed on BSE and NSE. We have obtained in-principle listing approvals for the Bonds by letter (No. DCS/SP/PI-BOND/11/13-14) dated November 23, 2013 from B SE andletter (No. NSE/LIST/222467-Q) dated November 25, 2013 from NSE. The Designated Stock Exchange for the Issue is BSE.

LEAD MANAGERS

A. K. CAPITAL SERVICES LIMITED

30-39, Free Press House, 3rdFloor,

Free Press Journal Marg,215, Nariman Point, Mumbai 400 021Tel: (+91 22) 6754 6500/6634 9300Fax: (+91 22) 6610 0594Email: [email protected] Grievance Email:[email protected]: www.akcapindia.comContact Person: Mr. Mandeep Singh/Mr.

Lokesh SinghiCompliance Officer: Mr. Vikas AgarwalSEBI Registration No.: INM000010411

AXIS CAPITAL LIMITED

1st Floor, Axis House, C-2 WadiaInternational Centre, P.B. Marg, Worli,Mumbai 400 025Tel: (+91 22) 4325 2525Fax: (+91 22) 4325 3000E-mail: [email protected] Grievance Email:[email protected]

Website: www.axiscapital.co.inContact Person: Mr. Akash Aggarwal

Compliance Officer: Mr. M. NatarajanSEBI Registration No.: INM000012029

ICICI SECURITIES LIMITED

ICICI Centre, H.T. Parekh Marg, Churchgate,Mumbai 400 020Tel: (+91 22) 2288 2460Fax: (+91 22) 2282 6580Email: [email protected] Grievance Email:[email protected]: www.icicisecurities.comContact person: Mr. Mangesh Ghogle/Mr. SumitAgarwal

Compliance Officer: Mr. Subir SahaSEBI Registration No.: INM000011179

KOTAK MAHINDRA CAPITAL

COMPANY LIMITED

27 BKC, 1st Floor, Plot No. C 27, G Block,Bandra Kurla Complex, Bandra (East),Mumbai 400 051Tel: (+91 22) 4336 0000Fax: (+91 22) 67132447E-mail: [email protected] Grievance: E-mail:[email protected];Website: www.investmentbank.kotak.com

Contact Person: Mr. Ganesh RaneCompliance Officer: Mr. Ajay VaidyaSEBI Registration Number: INM000008704

SBI CAPITAL MARKET

LIMITED

202, Maker Tower E, Cuffe ParadMumbai 400 005Tel: (+91 22) 2217 8300Fax: (+91 22) 2218 8332Email: [email protected] Grievance Email:[email protected]: www.sbicaps.comContact person: Ms. Shikh

Agarwal/Mr. Nithin KanugantiCompliance Officer: Mr. BhaskChakrabortySEBI Registration No.: INM00000353

REGISTRAR TO THE ISSUE BOND TRUSTEE#

KARVY COMPUTERSHARE PRIVATE LIMITEDPlot No. 17 to 24, Vithalrao Nagar, Madhapur, Hyderabad 500 081

Tel: (+91 40) 4465 5000;Fax: (+91 40) 2343 1551;E-mail: [email protected]; Investor Grievance Email:[email protected]; Website: http://karisma.karvy.com;

Contact Person: Mr. M. Murali Krishna; SEBI Registration Number: INR000000221

IL&FS TRUST COMPANY LIMITEDThe IL&FS Financial Centre, Plot C 22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051

Tel: (+91 22) 2653 3908;Fax: (+91 22) 2653 3297;Email: [email protected]; Investor Grievance Email:[email protected]: www.itclindia.com;

Contact Person: Senior Vice President; SEBI Registration No.: IND000000452

ISSUE PROGRAMME**

ISSUE OPENS ON ISSUE CLOSES ON

DECEMBER 3, 2013 DECEMBER 16, 2013** The Issue shall remain open for subscription from 10 A.M. to 5 P.M (Indian Standard Time). during the period indicated above with an option for early closure/extension as may be decided by the board of directors of our Company or

duly constituted committee thereof,including the Committee of the Board for Allotment and Post-Allotment Activities ofNTPCssecurities and the Committee for Public Issue of Tax Free Bonds(Board). In the event of suearly closure or extension of the subscription list of the Issue, our Company shall ensure that public notice of such early closure/extension is published on or before such early date of closure or the Issue Closing Date, as applicable, througadvertisement(s) in a t least one leading national daily newspaper with wide circulation.

# IL&FS Trust Company Limited has by its letter dated November 14, 2013, given its consent for its appointment as the Bond Trustee and for its name to be included in this Prospectus and in all subsequent communications sent to theBondholders.A copy of this Prospectus shall be filed with the Registrar of Companies, National Capital Territory of Delhi and Haryana (RoC), in terms of Sections 56 and 60 of the Companies Act 1956 and corresponding provisions of the CompanAct, 2013, to the extent notified and in force (Companies Act 2013) along with endorsed/certified copies of all requisite documents. For more information, see Material Contracts and Documents for Inspection on page 186.
http://www.ntpc.co.in/http://www.ntpc.co.in/http://www.ntpc.co.in/mailto:[email protected]:[email protected]://www.bseindia.com/http://www.bseindia.com/http://www.bseindia.com/http://www.akcapindia.com/http://www.investmentbank.kotak.com/mailto:[email protected]:[email protected]://www.sbicaps.com/mailto:[email protected]:[email protected]:[%E2%97%8F]@ilfsindia.commailto:[%E2%97%8F]@ilfsindia.commailto:[%E2%97%8F]@ilfsindia.commailto:[email protected]:[email protected]://www.itclindia.com/http://www.itclindia.com/http://www.itclindia.com/http://www.itclindia.com/mailto:[email protected]:[%E2%97%8F]@ilfsindia.commailto:[email protected]://www.sbicaps.com/mailto:[email protected]:[email protected]://www.investmentbank.kotak.com/http://www.akcapindia.com/http://www.bseindia.com/mailto:[email protected]://www.ntpc.co.in/


2/637

TABLE OF CONTENTS

SECTION I - GENERAL ........................................................ .............................................................. ............... 3

DEFINITIONS AND ABBREVIATIONS ................................................................ ............................................. 3CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCYOF PRESENTATION ............................................................................................................................................ 9FORWARD-LOOKING STATEMENTS ............................................................................................................ 11

SECTION II - RISK FACTORS ..................................................................................................................... .. 13

SECTION III - INTRODUCTION ................................................................................................................... 27

THE ISSUE .......................................................................................................................................................... 27SELECTED FINANCIAL INFORMATION ............................................................ ........................................... 31

GENERAL INFORMATION .............................................................. ............................................................... .. 37CAPITAL STRUCTURE .......................................................... .............................................................. ............. 46OBJECTS OF THE ISSUE .................................................................................................................................. 50STATEMENT OF TAX BENEFITS .............................................................. ...................................................... 52

SECTION IV- ABOUT OUR COMPANY ............................................................ ........................................... 56

INDUSTRY OVERVIEW ......................................................... .............................................................. ............. 56BUSINESS ........................................................................................................................................................... 59HISTORY AND CERTAIN CORPORATE MATTERS ............................................................. ........................ 70MANAGEMENT ................................................................................................................................................. 74PROMOTER ........................................................................................................................................................ 88STOCK MARKET DATA FOR OUR EQUITY SHARES AND DEBENTURES ............................................. 89

DESCRIPTION OF FINANCIAL INDEBTEDNESS ......................................................... ................................ 91SECTION VLEGAL AND OTHER INFORMATION ....................................................... ...................... 102

OUTSTANDING LITIGATION ......................................................... ............................................................... 102MATERIAL DEVELOPMENTS ........................................................ ............................................................... 122OTHER REGULATORY AND STATUTORY DISCLOSURES .......................................................... ........... 123

SECTION VIISSUE INFORMATION .............................................................. ......................................... 128

ISSUE STRUCTURE ................................................................ .............................................................. ........... 128TERMS OF THE ISSUE ........................................................... .............................................................. ........... 133ISSUE PROCEDURE ........................................................................................................................................ 149

SECTION VII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ................................... 175

SECTION VIIIOTHER INFORMATION ........................................................ ......................................... 186

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ........................................................... 186DECLARATION ............................................................ .............................................................. ...................... 187

ANNEXURE AFINANCIAL INFORMATION ........................................................... .............................. 188ANNEXURE BCREDIT RATING

ANNEXURE CCONSENT FROM THE BOND TRUSTEE

ANNEXURE DSTOCK MARKET DATA FOR OUR BONDS ON NSE


3/637

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

This Prospectus uses certain definitions and abbreviations which, unless the context indicates or impliesotherwise, have the meaning provided below. References to statutes, rules, regulations, guidelines and policieswill be deemed to include all amendments and modifications notified thereto.

Company Related Terms

Term Description

Issuer, NTPC, ourCompany or the Company

NTPC Limited, a company incorporated under the Companies Act 1956 and having itsregistered office at NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodhi Road,New Delhi 110 003

We or us, our NTPC, together with its Subsidiaries and Joint Ventures on a consolidated basis, unlessthe context otherwise requires

Articles/Articles ofAssociation/AoA

Articles of association of our Company

Board/Board of Directors Board of directors of our Company or a duly constituted committee thereof, includingthe Committee of the Board for Allotment and Post-Allotment Activities of NTPCssecurities and the Committee for Public Issue of Tax Free Bonds

BRBCL Bhartiya Rail Bijlee Company LimitedEquity Shares Equity shares of our Company of face value`10 each

Joint StatutoryAuditors/Auditors/IndependentAuditors

O.P. Bagla & Co. Chartered Accountants, K.K. Soni & Co. Chartered Accountants, PKFSridhar & Santhanam, Chartered Accountants, V. Sankar Aiyar & Co., CharteredAccountants, Ramesh C. Agrawal & Co., Chartered Accountants and A.R. & Co.,Chartered Accountants

Joint Venture(s) Our 21 joint venture companies (excluding PTC India Limited, where our Companyholds nominal shareholding of 4.05% of the issued, subscribed and paid-up equity sharecapital)as referred to in Hi story and Certain Corporate Matters on page 70

KBUNL Kanti Bijlee Utpadan Nigam Limited

Memorandum/Memorandum ofAssociation/MoA

Memorandum of association of our Company

NHL NTPC Hydro Limited

Promoter The President of India, acting through the MoP

Registered Office Registered and corporate office of our Company situated at NTPC Bhawan, SCOPEComplex, 7, Institutional Area, Lodhi Road, New Delhi 110 003

RoC Registrar of Companies, National Capital Territory of Delhi and Haryana

Scheme The scheme of amalgamation approved by the Board pursuant to a resolution dated May10, 2012 for amalgamating NHL with our Company

Subsidiaries (and each,individually, a Subsidiary)

Subsidiaries of our Company as referred to in History and Certain Corporate Matterson page 70

Issue Related Terms

Term Description

2012 Circular Circular (No. CIR./IMD/DF-1/20/2012) dated July 27, 2012 issued by SEBI

AK Capital A. K. Capital Services Limited

Allotment Advice The communication sent to the Allottees conveying the details of Bonds Allotted to theAllottees in accordance with the Basis of Allotment

Allotment/Allot/Allotted Issue and allotment of Bonds to successful Applicants pursuant to the Issue

Allottee A successful Applicant to whom Bonds are Allotted pursuant to the Issue

Applicant A person who makes an offer to subscribe to the Bonds pursuant to the terms and thisProspectus and Application Form for the Issue

Application An application to subscribe to the Bonds offered pursuant to the Issue by submission ofa valid Application Form and payment of the Application Amount by any of the modesas prescribed in this Prospectus

Application Amount Aggregate value of Bonds applied for, as indicated in the Application Form

Application Form Form in terms of which an Applicant (including the application form used by an NRIApplying on a non-repatriation basis) shall make an offer to subscribe to Bonds andwhich will be considered as the application for Allotment of Bonds in terms of thisProspectus

Application Supported byBlockedAmount/ASBA/ASBA

The Application (whether physical or electronic) used by an ASBA Applicant to makean Application authorising the SCSB to block the Application Amount in a specifiedbank account maintained with such SCSB


4/637

Application

ASBA Account An account maintained with a SCSB which will be blocked by such SCSB to the extentof the Application Amount mentioned in the Application Form made in ASBA mode byan ASBA Applicant

ASBA Applicant Any Applicant who applies for the Bonds through the ASBA Process.

Axis Axis Capital Limited

Base Issue Size `1,000 crore

Basis of Allotment The basis on which the Bonds will be Allotted to successful Applicants under the Issueand which is described in Terms of the Issue Basis of A llotment on page 135

Bond Certificate(s) Certificate issued to Bondholder(s) pursuant to Allotment, in case the Applicant hasopted for Bonds in physical form based on the request from the Bondholders

Bond Trust Deed Trust deed to be executed between the Bond Trustee and our Company

Bond Trustee Trustee for the Bondholders, in this case being IL&FS Trust Company Limited

Bondholder(s) Any person holding Bonds and whose name appears on the beneficial owners listprovided by the Depositories (in case of Bonds held in dematerialized form) or whosename appears in the Register of Bondholders maintained by our Company/the Registrarto the Issue/any other agency designated by our Company for such purpose (in case ofbonds held in physical form)

Bonds Tax-free secured redeemable non-convertible bonds in the nature of debentures, of ourCompany of face value of`1,000 each, having benefits under Section 10(15)(iv)(h) oftheIncome Tax Act, proposed to be issued by our Company pursuant to this Prospectus

Category I/QIBs PFIs, scheduled commercial banks, MFs registered with SEBI, state industrialdevelopment corporations, Indian bilateral and multilateral financial institutions, insurancecompanies registered with the IRDA, Alternative Investment Funds, subject to investmentconditions applicable to them under the Securities and Exchange Board of India(Alternative Investment Funds) Regulations, 2012, provident funds with a minimumcorpus of`25 crore, pension funds with a minimum corpus of `25 crore, the National

Investment Fund set up by resolution (F. No. 2/3/2005-DD-II) dated November 23, 2005of the GoI, published in the Gazette of India, insurance funds set up and managed by thearmy, navy, or air force of the Union of India and insurance funds set up and managedby the Department of Posts, India, subject to such being authorized to invest in the Bonds.

With regard to Section 372A(3) of the Companies Act 1956, see general circular (No.6/2013), dated March 14 , 2013 issued by the MCA clarifying that in cases where the

effective yield on tax free bonds is greater than the prevailing bank rate, there shall

be no violation of Section 372A(3) of the Companies Act 1956. Category II/Corporates Companies falling within the meaning of Section 2(20) of the Companies Act 2013,

limited liability partnerships, societies, funds, statutory corporations, trusts, partnershipfirms in the name of their respective partners, associations of persons, co-operativebanks, regional rural banks and other legal entities constituted and/or registered underapplicable laws in India that are authorized to invest in Bonds by their respective

constitutional and/or charter documents, subject to compliance with respective applicablelaws.

With regard to Section 372A(3) of the Companies Act 1956, see general circular (No.6/2013), dated March 14 , 2013 issued by the MCA clarifying that in cases where the

effective yield on tax free bonds is greater than the prevailing bank rate, there shallbe no violation of Section 372A(3) of the Companies Act 1956.

Category III/High Net Worth

Individuals

Resident individual investors (including HUFs applying through their Kartas), and NRIs

Applying on non-repatriation basis only, who have applied for Bonds for an amount morethan`10 lakh across all Series of Bonds in the Issue

Category IV/Retail IndividualInvestors

Resident individual investors (including HUFs applying through their Kartas), and NRIsApplying on non-repatriation basis only, who have applied for Bonds for an amount lessthan or equal to`10 lakh across all Series of Bonds in the Issue

CBDT Notification Notification No. 61/2013.F.No.178/37/2013-(ITA.I) dated August 8, 2013 issued by theCentral Board of Direct Taxes, Department of Revenue, Ministry of Finance, GoI

Collection Centres Collection Centres shall mean those branches of the Bankers to the Issue that areauthorized to collect the Application Forms (other than in respect of Applications madeunder ASBA) as per the Escrow Agreement

Consolidated Certificate In case of Bonds applied for in physical form or rematerialized Bonds held in physicalform, the certificate issued by our Company to the Bondholder for the aggregate amountof each of the Series of Bonds that are rematerialized and/or held by such Bondholder

Consortium (each individually,

a member of the Consortium)

The Lead Managers and the Consortium Members

Consortium Agreement Consortium Agreement dated November 21, 2013 among our Company and theConsortium


5/637

Consortium Members A.K Stockmart Private Limited, Kotak Securities Limited and SBICAP SecuritiesLimited

Corporate Portion The portion of the Issue, constituting 25.00% of the Issue which shall be available forallocation to Applicants falling under Category II

Credit Rating Agencies CRISIL and ICRA

Coupon/Interest PaymentDate(s)

The dates on which interest/coupon on the Bonds shall fall due for payment as specifiedin this Prospectus, which in case of the first Coupon/Interest payment shall be the date

falling one year from Deemed Date of Allotment and, for subsequent fiscals, shall be thesame date of such respective fiscal. The last interest payment will be made on therespective Redemption Dates/Maturity Dates for each Series of Bonds

Deemed Date of Allotment The date on which the Board approves the Allotment of Bonds for the Issue or such dateas may be determined by the Board and notified to the Designated Stock Exchange. Allbenefits accruing in relation to the Bonds including interest on Bonds shall be availablefrom Deemed Date of Allotment. Actual Allotment of Bonds may occur on a date otherthan Deemed Date of Allotment

Demographic Details The demographic details of an Applicant, such as his/her address, bank account details,occupation and PAN

Designated Branches Such branches of the SCSBs as shall collect the Application Form used by ASBAApplicants, a list of which is available atwww.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries or such otherwebsite as may be prescribed by SEBI from time to time

Designated Date Date of instructions being given for Application Amounts to be transferred from theEscrow Account(s) to the Public Issue Account or the Refund Account, and theRegistrar to the Issue issues instructions to the SCSBs for transfer of funds to the PublicIssue Account or unblock such amounts as are liable to be Refunded, as appropriate,following which the Board shall Allot the Bonds to successful Applicants, provided thatApplication Amounts received will be kept in the Escrow Account(s) up to this date andour Company will have access to such funds only after creation of adequate security forthe Bonds, or receiving final listing approvals for the Bonds from the Stock Exchanges,whichever is later

Designated Stock Exchange BSE

Direct Online ApplicationMechanism

Applications made through an online interface establishment and maintained by theStock Exchanges enabling direct application by investors to a public issue of their debtsecurities with an online payment facility in terms of the 2012 Circular

DP ID Depository Participant ID

Draft Prospectus The draft prospectus dated November 15, 2013 filed by our Company with the StockExchanges, which was open for public comments for 7 Working Days, in accordancewith SEBI Debt Regulations

Escrow Account(s) Account(s) opened with the Escrow Collection Bank(s), in whose favour Applicantsother than ASBA Applicants will issue cheques or demand drafts in respect of theApplication Amount when submitting Applications

Escrow Agreement Agreement dated November 22, 2013 entered into by our Company, the Registrar to theIssue, the Lead Managers and the Escrow Collection Bank(s) for collection of theApplication Amounts and where applicable, Refunds of amounts collected fromApplicants (other than ASBA Applicants) on the terms and conditions thereof

Escrow Collection Bank(s) Banks that are clearing members and registered with SEBI with whom the EscrowAccount will be opened, in this case being Axis Bank Limited, HDFC Bank Limited,ICICI Bank Limited, IDBI Bank Limited, IndusInd Bank Limited, Kotak MahindraBank Limited and State Bank of India

High Net Worth IndividualPortion

The portion of the Issue, constituting 25.00% of the Issue which shall be available forallocation to Applicants falling under Category III

ICICI Securities ICICI Securities Limited

Issue Public issue by our Company of tax-free secured redeemable non-convertible Bonds offace value of`1,000 each in the nature of debentures having tax benefits under Section

10(15)(iv)(h) of the Income Tax Act, aggregating up to`1,000 crore with an option toretain oversubscription up to`750 crore for issuance of additional Bonds aggregating to

a total of up to`1,750 crore*during fiscal 2014.

* In terms of the CBDT Notification, our Company is authorized to raise a minimum of70.00% of the Issue Size, by way of public issue and during the process of the publicissue(s), our Company may also, at its discretion, raise Bonds through private

placement route for an amount not exceeding 30.00% of the Issue Size, wherein suitableamount shall be earmarked for sovereign wealth funds, pension and gratuity funds. In

case our Company issues bonds through private placement route, the amount ofoversubscription that may be retained through public issue shall stand reduced

accordingly. Our Company shall ensure that bonds issued pursuant to the CBDT
http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries


6/637

Notification through public issue route and private placement route in fiscal 2014 shall,

in aggregate, not exceed `1,750 crore.

Issue Agreement The agreement entered into on November 13, 2013, between our Company and the Lead

Managers

Issue Closing Date December 16, 2013. The Issue shall remain open for subscription from 10.00 A.M. to5.00 P.M. (Indian Standard Time) during the Issue Period with an option for earlyclosure or extension, as may be decided by the Board

Issue Opening Date December 3, 2013Issue Period The period between the Issue Opening Date and the Issue Closing Date inclusive of both

days, during which a prospective Applicant may submit their Application Forms

Issue Size The aggregate limit of the Issue being`1,750 crore

Kotak Kotak Mahindra Capital Company Limited

Lead Managers AK Capital, Axis, ICICI Securities, Kotak and SBICAP

Market Lot/Trading Lot One Bond

OCB or Overseas CorporateBody

A company, partnership, society or other corporate body owned directly or indirectly tothe extent of at least 60.00% by NRIs including overseas trusts, in which not less than60.00% of beneficial interest is irrevocably held by NRIs directly or indirectly andwhich was in existence on October 3, 2003 and immediately before such date had takenbenefits under the general permission granted to OCBs under the Foreign ExchangeManagement Act, 1999. OCBs are not permitted to invest in the Issue

Portion The terms QIB Portion, Corporate Portion, High Net Worth Individual Portion and

Retail Individual Investor Portion are individually referred to as Portion andcollectively, referred to as Portions

Prospectus This prospectus dated November 25, 2013, filed by our Company with the RoC, theStock Exchanges and SEBI, in accordance with the provisions of the SEBI DebtRegulations

Public Issue Account Account opened with the Escrow Collection Bank(s) to receive monies from the EscrowAccount(s) and the ASBA Accounts, on the Designated Date

QIB Portion The portion of the Issue, constituting 10.00% of the Issue which shall be available forallocation to Applicants falling under Category I

Record Date Date falling 15 days prior to the relevant Coupon/Interest Payment Date on whichinterest amount or the Redemption Dates/Maturity Dates for each Series of Bonds onwhich the Maturity Amount is due and payable under the terms of this Prospectus. In theevent that the Record Date falls on a Saturday, Sunday or a public holiday in New Delhior any other payment centre notified in terms of the Negotiable Instruments Act, 1881,

the succeeding Working Day shall be considered as the Record DateRedemption Amount orMaturity Amount

Amount repayable on the Bonds, comprising face value of the Bonds, together withCoupon/Interest accrued at the applicable Coupon/Interest Rate for each Series of Bondson the respective Redemption Dates or Maturity Dates

Redemption Date or MaturityDate

The respective dates on which each Series of Bonds shall be redeemed and RedemptionAmount shall be paid by our Company, at the end of the respective tenure of such Seriesof Bonds

Refund Account Account opened with the Refund Bank from which Refunds, if any, of the whole or anypart of the Application Amount shall be made to Applicants other than ASBAApplicants

Refund Bank HDFC Bank Limited

Register of Bondholders Register of Bondholders (in case of Bonds held in physical form) maintained by theIssuer in accordance with the Companies Act and as detailed in Terms of the I ssue Rights of Bondholders on page 143

Registrar Agreement Agreement dated November 14, 2013 entered into between our Company and theRegistrar to the Issue, in relation to the responsibilities and obligations of the Registrarto the Issue pertaining to the Issue

Registrar to the Issue orRegistrar

Karvy Computershare Private Limited

Retail Individual InvestorPortion

The portion of the Issue, constituting 40.00% of the Issue which shall be available forallocation to Applicants falling under Category IV

SBICAP SBI Capital Markets Limited

Self Certified Syndicate Banksor SCSBs

The banks registered with SEBI under the Securities and Exchange Board of India(Bankers to an Issue) Regulations, 1994 offering services in relation to ASBA, a list ofwhich is available at www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediariesor such website as may be notified by SEBI from time to time. A list of thebranches of the SCSBs where Application Forms will be forwarded by such members ofthe Syndicate is available at www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-

IntermediariesSeries of Bonds or Series Series of Bonds, which are identical in all respects including but not limited to terms and

conditions, listing and ISIN number and as further stated to be each, an individual Series
http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries


7/637

in this Prospectus

Specified Cities or SyndicateASBA Locations

Application centres at Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur,Bengaluru, Hyderabad, Pune, Vadodara and Surat where the members of the Syndicateshall accept Application Forms under the ASBA process in terms of the SEBI Circular(No. CIR/CFD/DIL/1/2011), dated April 29, 2011

Stock Exchanges BSE and NSE

Syndicate Collectively, the members of the Consortium and their respective affiliatebrokers and

sub-brokers acting in relation to the IssueSyndicate ASBA ASBA Applications through the members of the Consortium or Trading Members of the

Stock Exchanges only in the Specified Cities

Tax-free Tax-free in the context of the Issue refers to tax benefits under Section 10(15)(iv)(h) ofthe Income Tax Act

Trading Member Intermediaries registered with a Broker or a Sub-Broker under the Securities andExchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and/or

with the Stock Exchanges under the applicable byelaws, rules, regulations, guidelines,circulars issued by the relevant Stock Exchanges from time to time

Tripartite Agreements Tripartite agreement dated September 3, 2004 between our Company, CDSL and theRegistrar to the Issue and the tripartite agreement dated July 16, 2004 between ourCompany, NSDL and the Registrar to the Issue

TRS Transaction registration slip

Trustee Agreement Trustee Agreement dated November 14, 2013, between our Company and the Bond

TrusteeWorking Days All days excluding Sundays or a public holiday in India or at any other payment centre

notified in terms of the Negotiable Instruments Act, 1881, except with reference to IssuePeriod and Record Date, where Working Days shall mean all days, excluding Saturdays,Sundays and public holiday in New Delhi or at any other payment centre notified interms of the Negotiable Instruments Act, 1881

Conventional and General Terms or Abbreviations

Term/Abbreviation Description/Full Form

Additional CIT Additional Commissioner of Income Tax

Alternative Investment Funds orAIFs

Alternative Investment Funds, as defined in and registered under the Securities andExchange Board of India (Alternative Investment Funds) Regulations, 2012

AS Accounting Standards issued by the Institute of Chartered Accountants of IndiaAssistant CIT Assistant Commissioner of Income Tax

Assistant CST Assistant Commissioner of Sales Tax

BSE BSE Limited

BTU British Thermal Unit

CDSL Central Depository Services (India) Limited

CESTAT Central Excise and Sales tax Appellate Tribunal

Commissioner CEST (A) Commissioner (Appeals), Customs, Central Excise and Service Tax

CIT (A) Commissioner of Income Tax (Appeals)

Commissioner ST Commissioner of Sales Tax

Companies Act 2013 Companies Act, 2013, to the extent notified by the MCA and in force as of the date ofthis Prospectus

Companies Act 1956 Companies Act, 1956 to the extent applicable as of the date of this Prospectus

Companies Act Companies Act 1956, as superseded and substituted by notified provisions of the

Companies Act 2013CRISIL CRISIL Limited

Debt Listing Agreement The debt listing agreement entered into by our Company with BSE and NSE

Depository(ies) CDSL and NSDL

Depositories Act Depositories Act, 1996

Deputy CIT Deputy Commissioner of Income Tax

DIN Director identification number

DP/Depository Participant Depository Participant, as defined under the Depositories Act

DRR Debenture Redemption Reserve

DTC Proposed Direct Taxes Code, as introduced in the Indian Parliament in 2010

ECB External commercial borrowing

ERP Enterprise Resource Planning

FIIs Foreign Institutional Investors (as defined under the Securities and Exchange Board ofIndia (Foreign Institutional Investors) Regulations, 1995, as amended from time to time)

registered with the SEBIFinancial Year/fiscal/FY Period commencing on April 1 of the immediately preceding calendar year and ending


8/637

Term/Abbreviation Description/Full Form

on March 31 of that particular calendar year

GoI or Government Government of India

HUF Hindu Undivided Family

ICRA ICRA Limited

IFRS International Financial Reporting Standards

IFSC Indian Financial System CodeIncome Tax Act Income Tax Act, 1961

India Republic of India

IRDA Insurance Regulatory and Development Authority

ITAT Income Tax Appellate Tribunal

JBIC Japanese Bank for International Co-operation (now known as the Japanese InternationalCo-operation Agency)

JMFC Judicial Magistrate First Class

KYC Know-your-customerMF Mutual Fund

MoC Ministry of Coal, GoI

MoP Ministry of Power, GoI

MCA Ministry of Corporate Affairs, GoI

MICR Magnetic Ink Character Recognition

NECS National Electronic Clearing SystemNEFT National Electronic Fund Transfer

NRI Non-Resident Indian

NRE Non-Resident External Account

NRO Non-Resident Ordinary Account

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

PAN Permanent Account Number

PFI Public Financial Institution, as defined under Section 2(72) of the Companies Act 2013

PIL Public interest litigation

PPAs Power purchase agreements

RBI Reserve Bank of India

RIL Reliance Industries Limited

RTGS Real Time Gross Settlement

SEBI Securities and Exchange Board of India

SEBI Debt Regulations Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations, 2008

SEBI ICDR Regulations Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)Regulations, 2009

Securities Act United States Securities Act, 1933

SLP Special leave petition

Supreme Court Supreme Court of India

TDS Tax deducted at source

VAT Value added tax

Technical and Industry Related Terms

Term Description2009-14 Regulations

Tariff regulations issued by the CERC for the period April 1, 2009 to March31, 2014

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

IPMCS Integrated Project Management and Control System

IPP Independent power producer

PCC Pulverized Coal Combustion

SEB State electricity board

Tariff Policy Tariff policy issued by the CERC in January 2006

GCV Gross Calorific Value

Notwithstanding the foregoing, terms in Main Pr ovisions of the Arti cles of Association, Statement of TaxBenefits on pages 175 and 52, respectively, and Annexure A - Financial I nformation, shall have the

meanings given to such terms in these respective sections.


9/637

CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND

CURRENCY OF PRESENTATION

Certain Conventions

All references in this Prospectus to Indiaare to the Republic of India and its territories and possessions.

Financial Data

The audited standalone and consolidated reformatted financial statements of our Company as of and for thefiscal years ended March 31, 2013, 2012, 2011, 2010 and 2009 included in this Prospectus has been prepared inaccordance with the requirements of Paragraph B(1), Part II of Schedule II, and revised Schedule VI of theCompanies Act 1956 and the SEBI Debt Regulations. The statement of standalone unaudited financial resultsfor the 6 months ended September 30, 2013 included in this Prospectus have been reviewed in accordance withthe Standard on Review Engagements (SRE) 2410 - Review of Interim Financial Information Performed by theIndependent Auditor of the Entity specified by the ICAI and standards on auditing issued by the Institute ofChartered Accountants of India.

In this Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to

rounding off. All decimals have been rounded off to 2 decimal points.

Currently, the financial year of our Company commences on April 1 of the immediately preceding calendaryear, and ends on March 31 of that particular calendar year; accordingly, all references to a particular financialyear, fiscal year, fiscalor FY, unless stated otherwise, are to the 12 month period commencing on April 1of the immediately preceding calendar year and ending on March 31 of that particular calendar year.

The degree to which the financial statements included in this Prospectus will provide meaningful information isentirely dependent on the readers level of familiarity with Indian accounting practices. Any reliance by personsnot familiar with Indian accounting practices on the financial disclosures presented in this Prospectus should,accordingly, be limited.

Currency and Unit of Presentation

In this Prospectus, references to `, Rs., Indian Rupees and Rupees are to the legal currency of India andreferences to US$, USD, and U.S. dollars are to the legal currency of the United States of America andreferences to Euro and are to the legal currency of the European Union. All references to JPY are toJapanese Yen, the legal currency of Japan.

Industry and Market Data

Any industry and market data used in this Prospectus consists of estimates based on reports compiled bygovernment bodies, professional organizations and other external sources available in the public domain. These

publications generally state that the information they contain has been obtained from publicly available sourcesbelieved to be reliable, but it has not been independently verified by us, its accuracy and completeness is notguaranteed, and its reliability cannot be assured. Although our Company believes that the industry and market

data used in this Prospectus is reliable, it has not been independently verified by us. The data used in thesesources may have been reclassified by us for purposes of presentation. Data from these sources may also not becomparable. The extent to which the industry and market data presented in this Prospectus is meaningfuldepends on the readers familiarity with and understanding of the methodologies used in compiling such data.

Exchange Rates

The exchange rates of US$,and JPYas on September 30, 2013, March 31, 2013, 2012, 2011, 2010 and 2009are provided below:

Currency Exchange

Rate into

as on

September30, 2013

Exchange Rate

into as on

March 31, 2013#

Exchange Rate

into as on

March 31,

2012^

Exchange Rate

into as on

March 31, 2011

Exchange Rate

into as on

March 31, 2010

Exchange Rate

into as on

March 31, 2009

1 US$ 62.78 54.39 51.16 44.65 45.14 50.95


10/637

Currency Exchange

Rate into

as on

September

30, 2013

Exchange Rate

into as on

March 31, 2013#

Exchange Rate

into as on

March 31,

2012^

Exchange Rate

into as on

March 31, 2011

Exchange Rate

into as on

March 31, 2010

Exchange Rate

into as on

March 31, 2009

1 84.67 69.54 68.34 63.24 60.56 67.48100 JPY 64.15 57.76 62.43 54.02 48.44 51.87

# March 31, 2013 and March 30, 2013 were Sunday and Saturday, respectively, and March 29, 2013 was a holiday; hence, exchange ratesfor the last working day of March 2013, i.e. March 28, 2013, have been used.

^March 31, 2012 was a trading holiday; hence, exchange rates for the last working day of March 2012, i.e., March 30, 2012, have been

used.Source: www.rbi.org.in


11/637

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Prospectus that are not statements of histo rical fact constitute forward-looking statements. Investors can generally identify forward-looking statements by terminology such as aim,anticipate, believe, continue, could, estimate, expect, intend, may, objective, plan, potential,project, pursue, shall, seek, should, will, would, or other words or phrases of similar import.

Similarly, statements that describe our strategies, objectives, plans or goals are also forward-looking statements.All statements regarding our expected financial conditions, results of operations, business plans and prospectsare forward-looking statements. These forward-looking statements include statements as to our businessstrategy, revenue and profitability, new business and other matters discussed in this Prospectus that are nothistorical facts. All forward-looking statements are subject to risks, uncertainties and assumptions about us thatcould cause actual results to differ materially from those contemplated by the relevant forward-lookingstatement. Important factors that could cause actual results to differ materially from our expectations include,among others:

Our expansion and diversification plans are subject to a number of risks and uncertainties, which mayresult in an adverse effect on our business, financial condition and prospects.

Power projects generally have long gestation periods, and subject us to various operational risks, whichmay result in an adverse effect on our business, financial condition and prospects.

We have significant fuel requirements and may not be able to ensure availability of adequate fuel atcompetitive prices. Also, we may not be able to ensure availability of sufficient amounts of coal of thegrade, quality and specifications that we require in order to operate our coal-based power stations, atcommercially reasonable prices.

The power sector in India is highly regulated. For instance, tariff regulations issued by the CentralElectricity Regulatory Commission (CERC), may adversely affect our business, financial conditionand prospects. Moreover, other regulatory matters and changes in applicable law and policy mayadversely affect us.

Our power purchase agreements (PPAs) may expose us to certain risks that may affect our business,financial condition and prospects. Further, there is no assurance that we will be able to sell poweroutside the long term PPAs and this could have an adverse impact on our revenues.

State utilities account for a significant portion of our sales of electricity generated from our directlyowned power stations, and any change that adversely affects our ability to recover dues from them mayadversely affect our financial position.

We are involved in a number of legal proceedings that may be determined against us. Further,opposition from local communities may adversely affect our business.

We have incurred significant indebtedness and may incur substantial additional borrowings inconnection with our business.

Failure to obtain or renew necessary regulatory approvals may adversely affect our business, financialcondition and prospects.

We are subject to various environmental, occupational, health and safety and other laws, which maysubject us to increased compliance costs that may have an adverse effect on our business, financialcondition and prospects.

Our business, financial condition and prospects may be adversely affected if we are unable to takeadvantage of certain tax benefits or if there are adverse changes to the tax regime in the future.

This Prospectus includes certain unaudited standalone financial information, which has been subjectedto limited review, in relation to our Company. Reliance on such information should, accordingly, belimited.

Our Joint Statutory Auditors have included certain notes and matters of emphasis in their reportsincluded in this Prospectus, which should be considered carefully by prospective investors in the Issue.

We have significant contingent liabilities, which may result in an adverse effect on our business,financial condition and prospects, to the extent that any such liabilities materialize.

Inability to attract and retain, or appropriately replace, our key personnel and sufficient skilled workersmay adversely affect our business, financial condition and prospects.

Other factors discussed in this Prospectus, including under Risk Factors on page 13.

Additional factors that could cause actual results, performance or achievements to differ materially include, butare not limited to, those discussed under Business and Materi al Developments on pages 59 and 122,

respectively. Although our Company believes that the expectations reflected in such forward-looking statementsare reasonable as of the date of this Prospectus, our Company cannot assure investors that such expectations will


12/637

prove to be correct. Given these uncertainties, investors are cautioned not to place undue reliance on suchforward-looking statements. If any of these risks and uncertainties materialize, or if any of our underlyingassumptions prove to be incorrect, our actual results of operations or financial condition could differ materiallyfrom that described herein as anticipated, believed, estimated or expected. All subsequent forward-lookingstatements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.


13/637

SECTION II - RISK FACTORS

You should carefully consider all the information in this Prospectus, including the risks and uncertainties

described below, and under Business on page 59 and Annexure A - Financial I nformation, before

making an investment in the Bonds. Additional risks and uncertainties not known to us or that we currently

believe to be immaterial may also have an adverse effect on our business, financial condition and prospects. If

any of the following or any other risks actually occur, our business, financial condition and prospects may beadversely affected and the price and value of your investment in the Bonds could decline such that you may lose

all or part of your investment.

The financial and other related implications of risks concerned, wherever quantifiable, have been disclosed in

the risk factors mentioned below. However, there are certain risk factors where the effect is not quantifiable and

hence has not been disclosed in such risk factors. The numbering of risk factors has been done to facilitate ease

of reading and reference, and does not in any manner indicate the importance of one risk factor over another.

You should not invest in the Issue unless you are prepared to accept the risk of losing all or part of your

investment, and you should consult your own tax, financial and legal advisors about the particular

consequences of an investment in the Bonds.

Unless otherwise stated, our financial information used in this section is derived from our consolidatedreformatted financial information for fiscal 2013, 2012, 2011, 2010 and 2009 prepared in accordance with

accounting standards generally accepted in India, and our unaudited standalone financial information for

September 30, 2013.

RISKS RELATING TO OUR BUSINESS

1. Our expansion and diversif ication plans are subject to a number of ri sks and uncertainti es, which may

resul t in an adverse effect on our business, fi nancial condi tion and prospects.

Our growth strategy and expansion plans subject us to a number of considerations, including thefollowing:

Our ability to finance capital expenditure for expansion, including the management of newequipment and projects and the maintenance and upgradation of existing equipment and projects, issubject to a number of risks, contingencies and other factors, including interest rates and availabilityand cost of borrowing.

Our ability to procure fuel at prices and terms acceptable to us. In particular, estimates of coalreserves are subject to assumptions and, if the actual amounts of such reserves are less than estimatedor if the quality of the coal reserves is lower than estimated or we are unable to commence plannedcaptive coal mining activities for any other reason, we may not be able to implement our expansion

plans.

Our ability to obtain licences under the Electricity Act, 2003, including transmission licences,distribution licences and electricity trading licences, and other environmental laws (including mininglaws) and labour, health and safety laws.

Actual increases in demand for power as well as other services and products offered by us, such as

our consultancy and other allied businesses, may not meet anticipated demand based on which wehave planned our operations and growth for any given periods, or the success or sustainability of anyof our growth plans may be adversely affected by other industry trends that we have been unable tocorrectly anticipate.

There may be potential adverse short-term effects on operating results through increased costs orotherwise.

We may experience economic, political and social uncertainty or volatility in the diverse regions inwhich we currently operate or in which we plan to set up operation.

We may face challenges associated with recruitment and retention of adequate skilled personnel aswell as possible diversion of management time and focus and managing the realignment of ourmanagement and administrative resources.

We may not be selected for projects that we may bid for in the future, including as a result of other

entities being able to make a more competitive bid. We may face increasing competition going forward, including from private sector players, in our

current as well as planned business activities.


14/637

We also expect that the execution of our growth strategy and new power projects will place significantstrains on our management, financial and other resources. Continued expansion increases the challengesinvolved in financial and technical management, recruitment, training and retaining sufficient skilledtechnical and management personnel, and developing and improving our internal administrativeinfrastructure. If we are unable to successfully implement our business plan and growth strategy, we may

also be unable to meet the annual performance targets set by the Government pursuant to the annualmemorandum of understanding which we enter into with the Government. Any of these factors may havean adverse effect on our business, financial condition and prospects.

In particular, as we seek to diversify our operations, including by way of forward and backwardintegration in the power sector and by way of diversifying our fuel mix, we may be subject to a numberof additional risks. Any new businesses that we may enter into, may subject to a legal, regulatory, policyand business environment that we are not currently familiar with, or may pose significant challenges toour administrative, financial and operational resources. The early stages and long gestation periods ofnew businesses may make it difficult to predict their economic viability. Therefore, there is no assuranceas to the timing and amount of any returns or benefits that we may receive from new business initiativesor new fuel sources that we are currently exploring or developing.

2.

Power pr ojects general ly have long gestation periods, and subject us to various operational r isks,which may resul t in an adverse effect on our business, fi nancial condi tion and prospects.

Power projects generally have long gestation periods, which may entail a significant period of timebefore the economic viability of a given project can be established and there may be substantial capitaloutflow before we are able to realize expected benefits or returns on our investment. Moreover, theconstruction, development or operation of our power projects, coal mines or other facilities may bedisrupted or affected by various factors that may be beyond our control, including the following:

Our ability to acquire land depends on its ownership status, the classification of land use and thewillingness of owners to sell or lease their land. Acquisition of Government land may involve anumber of difficulties relating to rehabilitation and resettlement and provision of adequatecompensation, while diversion of forest land would be subject to Government clearance.

We depend on independent contractors for construction, installation, delivery and commissioning, aswell as the supply and testing of key plant and equipment and other non-core aspects of our business.We may only have limited control over the timing and quality of services, equipment or supplies

provided by contractors as well as suppliers and vendors, and any failure or delay in performance byany such persons or entities could result in time and cost overruns for us.

We may experience geological difficulties during the execution of construction projects, especiallyduring the development of hydroelectric, oil and gas and coal mining projects. For example, duringthe execution of our construction projects, we may discover adverse rock strata or terrain, or trappedgases or trapped water and our plant designs may be unsuitable for dealing with such geology. Thesegeological factors may result in costs and time overruns or cause us to determine that a planned

project or expansion is no longer economically feasible.

Mechanical failure and equipment shutdowns, explosions, fires, natural disasters such as cyclonesand earthquakes, breakdown, failure or substandard performance of equipment, improper installation

or operation of equipment, accidents, transmission or transportation interruptions, environmentaldisasters, significant social or political disruptions including terrorism and labor disputes or industrialaction may significantly affect our operations.

Non-availability of fuel of desired quantity and quality may significantly disrupt our operations orreduce our profitability.

If such operational difficulties occur, our ability to supply electricity to our customers or source coal oroil and gas may be adversely affected. In the event any facility is significantly damaged or forced toshut down for a significant period of time, our business, financial condition and prospects may beadversely affected.

In particular, many of our power stations are ageing and may subject us to additional risks to the extentthat we may be required to undertake renovation and modernization schemes involving significantcapital expenditure.


15/637

3. We have signi f icant f uel requi rements and may not be able to ensure availabil ity of adequate fuel at

competi tive pri ces. Also, we may not be able to ensure availabil ity of suff ici ent amounts of coal of the

grade, qual ity and specif icati ons that we requi re in order to operate our coal-based power stations, at

commerci all y reasonable pri ces.

Availability of fuels at competitive prices is critical to our business. Fuel costs represent our largest

expense, constituting 76.13% of our total expenses for fiscal 2013 on a standalone basis.Although wepurchase a significant part of our fuel requirements, particularly coal and gas, under long-term fuelsupply agreements, there is no assurance that our suppliers will be able to satisfy their contractualcommitments, particularly in relation to the grade and quality of coal that we may require for ouroperations, or that alternative sources of supply will be available to us on reasonable terms. In the eventour contracted sources of fuel supply or other domestic sources of fuel supply (for instance, through shortterm purchase agreements or orders placed by us on the spot market) fall short for any reason, or thegrade, quality and specifications of fuel available for supply to us does not match our specifications andrequirements, we may be required to explore alternative sources of fuel supply, including for import offuels such as coal from other countries at prices that may be significantly higher than the prices at whichwe have historically sourced fuel for our power stations in the past.

Further, domestic coal and gas allocations and gas prices are currently determined by Government policy,

while coal prices are contractually set, which limits our financial and operational flexibility to an extent.In the event that coal and gas supplies or gas prices in India were to be deregulated, there is no assurancethat we will be able to obtain adequate supplies of coal and gas at competitive prices. Moreover, theavailability and cost of fuels, including coal and gas, are subject to volatility in world commoditymarkets, the level of investment in exploitation of mine reserves in India and elsewhere, the quality andgrade of coal and gas available in India and elsewhere, and other factors that may be beyond our control.Any constraints on sourcing adequate quantities of fuel at commercially reasonable costs, and ofacceptable grade, quality or other specifications, may adversely affect our business, financial conditionand prospects.

The domestic demand for coal is expected to increase significantly in the future, driven by significantcapacity addition in the Indian power sector. High dependence on domestic coal could therefore exposeus to potential price and availability risks. In the event of a shortage of coal, not only will the

productivity of our coal-fired power stations be reduced but it will also hinder the our expansion plans.We also source coal through bilateral short term memoranda of understanding, through imports andthrough e-auctions. However, there is no assurance that such sources of coal will continue to be availableto us in the future at reasonable prices or terms or at all.

With respect to gas, our use has been limited in the past due to inadequate supply of domestic gas. Wehave arranged for the supply of re-liquefied natural gas through long- and short-term contracts to meet

part of its requirements. The short-term RLNG contracts are agreed on a reasonable endeavors basiswith no obligation on our part of such as ship-or-pay or, take-or-pay and no supply or pay obligationon the part of the suppliers. However, due to high re-liquefied natural gas prices, the off-take of power bydistribution companies and beneficiaries and, consequently, re-liquefied natural gas consumption have

been low. We estimate that we will require 16.39 million metric standard cubic metres of gas per day infiscal 2014 to operate our directly owned gas-fired power stations at a plant load factor (which is a

measure equal to the percentage of capacity actually utilized) of 85.00%. If we experience a shortage inthe supply of gas to our gas-fired power stations, the productivity of those power stations would bereduced. Although we are in the process of securing a supply of gas for our projects at Kawas andGandhar, there is no assurance that we will be able to secure an adequate supply of gas for our currentgas-fired power stations or future gas-fired projects. Our ability to secure adequate fuel supply for ourKawas and Gandhar projects may also be affected by our dispute with Reliance Industries Limited(RIL) on the sale and purchase agreement for gas supply for those projects. For details, seeOutstanding L iti gation on page 102.

Further, Ratnagiri gas power project, which is under operation with one our 21 joint venture companies(excluding PTC India Limited, where our Company holds nominal shareholding of 4.05% of the issued,subscribed and paid-up equity share capital) (Joint Ventures), Ratnagiri Gas and Power PrivateLimited, is facing shortage of domestic gas supply from KG-D6 block. Any shortage of this kind may

severally affect the solvency of the project and that of our Joint Ventures.


16/637

4. The power sector in I ndia i s highly regulated. For instance, tari ff regulations issued by the CERC,

may adversely affect our business, fi nancial condi tion and prospects. Moreover, other regulatory

matters and changes in appli cable law and pol icy may adversely af fect us.

Our businesses are regulated by the central and state governments in India, through a number of laws,rules, regulations and policies applicable to the power sector in India.

For instance, we are significantly impacted by tariff policy issued by the GoI and regulations anddirectives issued by the CERC. The tariff policy issued in January 2006 (Tariff Policy) provides thatall future requirements for power be procured through tariff based competitive bidding by distributionlicensees, except in cases of expansion of existing projects or where there is a state controlled/owneddeveloper and where regulators will need to resort to tariff determination based on norms provided thatexpansion of generating capacity by private developers for this purpose be restricted to one time additionof not more than 50.00% of the existing capacity. For public sector projects, capacity addition of all newgeneration and transmission projects shall be decided on the basis of competitive bidding after January 6,2011, provided that a developer of a hydroelectric project would have the option of getting the tariffdetermined by the appropriate commission subject to conditions specified in the Tariff Policy.Exemptions from the competitive bidding route may be adopted in certain transmission projects. TheGovernment has also issued competitive bidding guidelines. Both central power sector utilities and

private sector developers are participating in the tariff based bidding process for securing power projects,including coal-fired ultra mega power projects.

In addition, the CERC has issued tariff regulations for the period from April 1, 2009 to March 31, 2014(2009-14 Regulations), under which return on equity is calculated on a pre-tax basis at a base rate of15.50%, grossed up by the tax rate applicable for the respective year. For projects commissioned on orafter April 1, 2009, there is additional return of 0.50% on a grossed up basis if the new projects arecompleted within the timeline specified in the 2009-14 Regulations. In addition, under the 2009-14Regulations, we can recover deferred tax liability only as and when it materializes on our powergeneration business through our tariffs on power sold up to March 31, 2009. Actual income tax paid andany deferred tax liability created during fiscal 2010 to 2014 are not recoverable as part of tariff. Recoveryof interest cost on debt and return on equity for all power stations declared in commercial operation on orafter April 1, 2009 will be based on a prescribed 70:30 debt to equity ratio. Where equity employed is

greater than 30.00%, the amount of equity for determination of tariff will be limited to 30.00%. Return onexcess equity can be recovered on the same basis as recovery on the debt component. Where equityemployed is less than 30.00%, the actual amount of equity will be used for purposes of determination oftariff. In case of existing power stations, recovery of interest costs on debt will be based on the debt toequity ratio previously allowed by the CERC for determination of tariff for the period ending March 31,2009. Tariff regulations for the period April 1, 2014 to March 31, 2019 are yet to be notified by theCERC. There is no assurance that the CERC will continue the present methodology for fixation of tariffs.Further, for the period beyond March 31, 2019, the nature of the tariff regulations may pose additionalrisks which presently are not comprehensible.

Moreover, the regulatory framework in India continues to evolve and there is a particular focus onincreasing private participation in the future. For instance, competition in hydroelectric power is likely toincrease in the future due to increased opportunities for private investment in the market and the

hydroelectric potential in India, pursuant to the New Hydro Policy 2008.Non-compliance with applicablelaws and regulations may also lead to penalties, revocation of our permits and registrations, or costlylitigation. Any significant legal or regulatory change or uncertainty in the power sector may adverselyimpact our business, financial condition and prospects.

5. Our PPAs may expose us to certain risks that may affect our business, financial condition and

prospects. Fur ther, there is no assurance that we wil l be able to sell power outside the long term PPAs

and th is could have an adverse impact on our revenues.

Under our PPAs with our customers, which are generally state utilities, our profitability is largely afunction of our ability to operate our power projects at optimal levels in accordance with minimum

performance standards that may be determined from time to time by regulatory bodies and our ability tomanage our costs. Any failure to meet such minimum performance standard or manage our costs may

have an adverse effect on our business, financial condition and prospects. Further, the PPAs haveinherent risks that may restrict our operational and financial flexibility. For example, long-term PPAs


17/637

provide for sale of power to customers at tariffs and terms determined by the regulator. Accordingly, ifthere is an industry-wide increase in tariffs, we will not be able to take advantage of increased tariffs ornegotiate satisfactory alternative off-take arrangements. These limitations affect our ability to enjoy the

benefits of an increased tariff rate that our competitors selling power outside long-term PPAs mayotherwise enjoy.

In addition, in the event that PPAs are terminated prematurely, or not renewed or extended after the initialterm expires and, if we are unable to enter into purchase agreements with other customers, this may havean adverse effect on our business, financial condition and prospects. Further, as provided by the NationalElectricity Policy 2005 (NEP), up to 15.00% of our new generating capacities may be sold outsidelong term PPAs. We are not able to guarantee that we will be able to sell outside the PPAs at better pricesor at all. We may enter into short term off-take agreements or sell power on a merchant basis to entities,including entities affiliated with us. Such agreements may create additional variability in our revenuesand could expose our business to risks of market fluctuations in demand and price for power. If we areunable to adapt our business model to sell power from our power stations outside long term PPAs or sellthe power generated by our merchant power stations, our business, financial results and prospects may beadversely affected.

6. State util iti es account f or a signi fi cant portion of our sales of electri city generated fr om our directly

owned power stations, and any change that adversely af fects our abil ity to recover dues from themmay adversely af fect our f inancial positi on.

The state-owned distribution companies and State Electricity Boards (SEBs) are the largest purchasersof electricity generated from our power stations. Some of these entities have had weak credit histories inthe past and continue to operate under financial constraints, due in part to the regulatory and policyconstraints applicable to them in their respective states. Historically, we have had significant problemsrecovering payments from the SEBs, which, we believe, have been largely resolved due to Governmentalintervention. However, any inability to adequately enforce such customers ability to honor their offtakeobligations towards us, or the escrow, letter of credit or other arrangements entered into with the SEBs orany other change that adversely affects our ability to recover dues from the SEBs or other state utilities(for instance, due to state policy or regulatory requirements that the state utilities may be subject to, orother factors affecting the profitability, creditworthiness and operations of such entities) may adversely

affect our business, financial condition and prospects.

7. We are involved in a number of l egal and other proceedings and claims that may be determined

against us. Fur ther, opposit ion f rom local communi ties may adversely affect our business.

In the ordinary course of our business, we, as well as our Directors and officers, are involved in severallegal, regulatory, arbitral and administrative proceedings and claims at various levels of investigation oradjudication. These proceedings may include criminal cases (including motor accident claims, fatalaccident claims, dishonor of cheques, claims regarding theft of goods, petitions for revision enforcementor quashing of orders previously passed in relation to employment claims, etc.), public interest litigation(PIL), appeals against tariff orders of the CERC, civil suits, arbitral claims, taxes (including incomeand sales tax) and other statutory levies (including royalty claims), employment-related disputes, land-acquisition related disputes, environmental disputes, claims regarding alleged defect in title of properties,

trespass and claims for premium, rental and other payments in respect of property owned, leased orotherwise used by us, etc. The total claim, financial implication or amount of contingent liability relatingto such proceedings as on the date of this Prospectus is not ascertainable, including due to the monetaryclaim against us not having been quantified in many instances, and may be substantial. An adversedecision in any such proceeding may have an adverse effect on our business, financial condition and

prospects. There is also no assurance that similar proceedings will not be initiated against us in future.Further, should new developments arise, such as a change in Indian law or rulings against us by appellatecourts or tribunals, we may need to make provisions in ourfinancial statements, which could increase ourexpenses and liabilities.

In addition, the acquisition of land for our projects and related rehabilitation and resettlementrequirements, as well as the construction and operation of our projects or our fuel diversification plans(including coal mining, hydroelectric, renewable or nuclear power projects), may face opposition from

local communities or special interest groups due to the perceived negative impact such activities mayhave on the environment and community access to natural resources, or other specific factors from time


18/637

to time. Significant opposition by local communities, special interest groups and other parties may delayproject implementation, divert management focus and otherwise adversely affect our business, financialcondition and prospects.

8. We have incurr ed signi fi cant indebtedness and may incur substantial additi onal borr owings in

connection with our business.

As on March 31, 2013, we had total outstanding indebtedness of ` 70,418.78 crore on a consolidatedbasis, including`22,426.41 crore of secured loans. As on September 30, 2013, we had total outstanding

indebtedness of`60,629.44 crore on a standalone basis, including `10,125.64 crore of secured loans.Our substantial indebtedness and restrictions imposed on us under current or future loan arrangementsmay adversely impact our business, financial condition and prospects in various ways, including thefollowing:

We may be required to dedicate a significant portion of our cash flow towards repayment of debt,which will reduce availability of cash flow to fund working capital, capital expenditures, acquisitionsand other general corporate requirements.

We may be required to maintain certain financial ratios and satisfy certain financial or othercovenants.

Because some of our borrowings are secured against our assets, lenders may sell or take over thoseassets to enforce their claims.

We may be required to obtain approval from our lenders, regarding, among other things,reorganisation, amalgamation or merger, incurrence of additional indebtedness, disposition of assetsand expansion of our business, and no assurance can be given that we will receive such approvals ina timely manner or at all.

Our project costs may increase since we capitalize interest during the construction of our facilities.

Moreover, our ability to meet our debt service obligations and to repay outstanding borrowings willdepend primarily upon the cash flow generated by our business over time, as well as our ability to tap thecapital markets as a source of capital. If we fail to meet our debt service obligations or financial or othercovenants under our financing documents, our lenders could declare default and cancel unutilizedfacilities, accelerate the maturity of our obligations or enforce security, which may have an adverse effecton our business, financial condition and prospects, particularly in the event cross-default under multiplefinancing arrangements is triggered. Further, in such event, the availability and cost of future borrowingsmay be negatively impacted, with consequences that may include increased finance charges, decreasedincome available to fund future growth, decreased working capital and imposition of restrictive covenantsunder financing arrangements.

9. Fail ure to obtain or r enew necessary regulatory approvals may adversely af fect our business, fi nancial

conditi on and prospects.

In the ordinary course of our business, we as well as our independent contractors and counterparties, arerequired to obtain and, in several cases, renew, from time to time, various regulatory approvals,including, for instance, consents from the state pollution control boards in India to establish and operateour projects and other facilities and for appropriate handling of biomedical and other hazardous waste,discharge of waste water, as well as registrations with relevant tax and labor authorities in India. In

particular, several of our environmental, electrical installation testing, wireless set and boiler-usage orgas-cylinder storage, height clearance, structural design and stability and other approvals across severalof our projects are scheduled to expire in the ordinary course on December 31, 2013 or on other dates inthe near future, and we have applied for or are in the process of applying for renewals or extensions ofsuch approvals in due course.

Failure to obtain and maintain or renew required approvals and registrations may have an adverse effecton our business, financial condition and prospects. Further, such approvals and registrations may besubject to numerous conditions, including periodic reporting or audit requirements, which may require usto undertake substantial compliance-related expenditure and other procedures. Any actual or alleged non-compliance with specified conditions may result in suspension or cancellation of, or refusal to renew,required approvals and registrations or imposition of penalties, which may be significant, by the relevantauthorities. A suspension, cancellation or refusal to extend required approvals and registrations mayrequire us to cease production at some or all of our facilities or to engage in time-consuming and costly


19/637

administrative and/or legal proceedings in order to resolve such issues, or may affect other aspects of ouroperations, which may have an adverse effect on our business, financial condition and prospects.

10. We are subject to various environmental , occupational, health and safety and other laws, which may

subject us to increased compli ance costs that may have an adverse ef fect on our business, f inancial

conditi on and prospects.

Our operations are subject to central, state and local laws and regulations relating to the protection of theenvironment and occupational health and safety, including those governing the generation, handling,storage, use, management, transportation and disposal of, or exposure to, environmental pollutants orhazardous materials resulting from power projects as well as with respect to the utilization of fly ash

produced in course of our generation and with respect to mining operations conducted in India . Forinstance, we require approvals under the Water (Prevention and Control of Pollution) Act, 1974 and theAir (Prevention and Control of Pollution) Act, 1981, in order to establish and operate our power projects,and will require prospecting licences and, subsequently, mining leases in order to commence prospectingand mining activities at the coal blocks allocated to us.

In addition, in the ordinary course, we are subject to several risks generally associated with powergeneration as well as coal mining, including explosions, fires, mechanical failures, accidents, discharges

of toxic or hazardous substances or gases and other environmental risks. These hazards may causepersonal injury and loss of life, environmental damage and severe damage to or destruction of propertyand equipment. We may incur substantial costs, including clean up or remediation costs, fines and civil orcriminal sanctions, and third-party property damage or personal injury claims, as a result of violations ofor liabilities under environmental or health and safety laws or actual or alleged noncompliance with

permits or registrations required at our facilities, or the conditions imposed on us under such permits andregistrations. Further, on the expiry or termination of any operating permits held by us, including anymining licences granted to us in the future, we may be required to incur significant costs to dismantle anddecommission our operations and remove our equipment and installations at such sites.

Moreover, environmental and health and safety laws, regulations and policies, and the interpretation andenforcement thereof, are subject to change and have tended to become stricter over time. In particular, weexpect that the GoI, as well as the governments of several nations worldwide, may be considering further

measures to achieve a significant reduction in carbon and greenhouse gas emissions. Compliance withcurrent and future environmental and health and safety laws, regulations and policies, particularly at older

power stations, may require substantial capital expenditure. If we fail, or are alleged to have failed, tocomply with such laws, regulations and policies, we may be subject to significant fines, penalties, costs,liabilities or restrictions on operations. In certain cases, we may also be required to become involved incostly and time-consuming legal or administrative proceedings in order to resolve any such allegations orclaims that may arise against us, in relation to compliance with applicable environmental and health andsafety laws, regulations and policies, which may adversely affect our business, financial condition and

prospects.

11. Our business, f inancial condit ion and prospects may be adversely af fected i f we are unable to take

advantage of certain tax benefi ts or i f there are adverse changes to the tax regime in the futur e.

Section 80-IA of the Income Tax Act provides that, subject to certain conditions, 100.00% of the profitsfrom projects for generation, distribution or transmission of power, which begin generation or distributionof power before March 31, 2014, are entitled for deduction from total income for 10 conse