DRAFT SHELF PROSPECTUS

Dated August 16, 2013

RURAL ELECTRIFICATION CORPORATION LIMITED (A Government of India Undertaking)

Our Company was incorporated as a private limited company under the Companies Act, 1956 on July 25, 1969 at New Delhi as “Rural Electrification Corporation Private Limited”. The word “private” was deleted from the name of our Company on June 03, 1970. Our Company became a deemed public limited company with effect from July 01, 1975. Our Company was converted into a public limited company with effect from July 18, 2003. For further details in relation to the corporate history of our Company, see the section titled “History and Certain Corporate Matters” on page 116 of this Draft Shelf Prospectus.

Registered Office and Corporate Office: Core 4, SCOPE Complex, 7, Lodhi Road, New Delhi 110 003, India Telephone: +91 11 4102 0101; Facsimile: +91 112436 9846; E-mail: rectfbond@recl.nic.in; Website: www.recindia.nic.in

For further details in relation to the changes in our registered office, see the section titled “History and Certain Corporate Matters” on page 116 of this Draft Shelf Prospectus. Compliance Officer: Mr. Rajesh Kumar, Deputy General Manager (Finance) Telephone: +91 11 4309 1676; Facsimile: +91 11 2436 9849; E-mail: rectfbond@recl.nic.in

PROMOTER OF THE COMPANY: THE PRESIDENT OF INDIA, ACTING THROUGH THE MINISTRY OF POWER, GOVERNMENT OF INDIA PUBLIC ISSUE BY RURAL ELECTRIFICATION CORPORATION LIMITED (“REC” OR “ISSUER” OR THE “COMPANY”) OF TAX FREE SECURED REDEEMABLE NON CONVERTIBLE BONDS OF FACE VALUE OF ` 1000 EACH IN THE NATURE OF DEBENTURES HAVING TAX BENEFITS UNDER SECTION 10 (15) (iv) (h) OF THE INCOME TAX ACT, 1961, AS AMENDED (“BONDS”) FOR AN AMOUNT AGGREGATING UPTO THE SHELF LIMIT* (` 5,000 CRORES) BY WAY OF ISSUANCE OF BONDS IN ONE OR MORE TRANCHES IN THE FISCAL 2014 (EACH A “TRANCHE ISSUE”, AND TOGETHER ALL TRANCHE ISSUES UPTO THE SHELF LIMIT,“ISSUE”). EACH TRANCHE ISSUE WILL BE OFFERED BY WAY OF A TRANCHE PROSPECTUS CONTAINING, INTER ALIA, THE TERMS AND CONDITIONS OF SUCH TRANCHE ISSUE (“TRANCHE PROSPECTUS”), WHICH SHOULD BE READ TOGETHER WITH THE SHELF PROSPECTUS OF THE ISSUE. THE SHELF PROSPECTUS TOGETHER WITH THE RELEVANT TRANCHE PROSPECTUS FOR A SPECIFIC TRANCHE ISSUE SHALL CONSTITUTE THE “PROSPECTUS”. * In pursuance of CBDT Notification, our Company is authorised to raise a minimum of 70% of the allocated limit by way of various tranche(s) 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 in one or more tranche(s) for an amount not exceeding 30% of the allocated limit wherein suitable amount shall be earmarked for Sovereign Wealth Funds, Pension and Gratuity Funds. Our Company shall ensure that Bonds issued through public issue route and private placement route in the Fiscal 2014 shall together not exceed ` 5,000 crores. In case our Company raises funds through private placement route during the process of the present Issue, the Shelf Limit for the Issue shall get reduced by such amount raised and the same shall be disclosed in the respective Tranche Prospectus(es). The Issue, and for the avoidance of doubt, each Tranche Issue is being made under the provisions of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, as amended (“SEBI Debt Regulations”) and Notification no. 61/2013 F.No. 178/37/2013-(ITA.1) dated August 08, 2013 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, by virtue of powers conferred upon it by item (h) of sub-clause (iv) of clause (15) of section 10 of the Income Tax Act, 1961.

GENERAL RISKS Investors are advised to read the Risk Factors carefully before taking an investment decision in relation to the Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. Investors are advised to refer to section “Risk Factors” in this Draft Shelf Prospectus and the Shelf Prospectus and “Recent Developments” in the relevant Tranche Prospectus of any Tranche Issue before making an investment in such Tranche Issue. This Draft Shelf Prospectus has not been and will not be 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 companiesor any stock exchange in India.

ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer having made all reasonable inquiries, accepts responsibility for, and confirms that this Draft Shelf Prospectus read together with the Shelf Prospectus and the relevant Tranche Prospectus for a Tranche Issue does contain and will contain all information with regard to the Issuer and the relevant Tranche Issue which is material in the context of the relevant Tranche Issue; the information contained in this Draft Shelf Prospectus and together with the Shelf Prospectus and the relevant Tranche Prospectus for a Tranche Issue will be true and correct in all material respects and is not misleading in any material respect; the opinions and intentions expressed herein are honestly held and that there are no other material facts, the omission of which makes this Draft Shelf Prospectus read with the relevant Tranche Prospectus as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect at the time of the relevant Tranche Issue.

CREDIT RATINGS CRISIL Limited (“CRISIL”) vide its letter no. MS/FSR/REC/2013-14/971 dated August 13, 2013, has assigned a credit rating of “CRISIL AAA/Stable” to the long term borrowing programme of the Company aggregating to ` 34500 crores. Credit Analysis & Research Limited (“CARE”) vide its letter dated August 14, 2013 has assigned a credit rating of “CARE AAA” to the market borrowing programme of the Company for FY 2013-14 aggregating to ` 37000 crores. India Ratings and Research Private Limited ("IRRPL") vide its letter dated August 13, 2013 has assigned a credit rating of “IND AAA” to the borrowing programme of the Company aggregating to ` 37000 crores. ICRA Limited (“ICRA”) vide its letter no. D/RAT/2013/R7/7 dated August 14, 2013 has assigned the rating of “`[ICRA] AAA” to the long term borrowing programme of the Company aggregating to ` 37000 crores. Instruments with such ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. The above ratings are not a recommendation to buy, sell or hold securities and hence the investors should take their own decision before investing in the Issue. These ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings. For further details and for rationale for the above ratings, please refer to Appendix - II of this Draft Shelf Prospectus.

PUBLIC COMMENTS This Draft Shelf Prospectus has been filed with the BSE Limited (“BSE”) (“Designated Stock Exchange”) pursuant to the provisions of the SEBI Debt Regulations. This Draft Shelf Prospectus is open for public comments. All comments on this Draft Shelf Prospectus are to be forwarded to the attention of the Compliance Officer of REC. All comments from the public must be received by REC within 7 (seven) Working Days (i.e. until 5 p.m. on such seventh Working Day) from the date of filing of this Draft Shelf Prospectus with the Designated Stock Exchange (date of filing: August 16, 2013). Comments may be sent through post, facsimile or e-mail.

LISTING The Bonds are proposed to be listed on the BSE, the Designated Stock Exchange for the Issue.The BSE has given its in principle approval for listing vide letter no. [●] dated [●].

LEAD MANAGERS TO THE ISSUE

A.K. CAPITAL SERVICES LIMITED 30-39 Free Press House, 3rd Floor, Free Press Journal Marg, 215, Nariman Point, Mumbai 400021 Tel: +91 22 6754 6500/ 6634 9300; Facsimile: +91 22 6610 0594 Email: rectfbonds3@akgroup.co.in Investor Grievance Email: investor.grievance@akgroup.co.in Website: www.akcapindia.com Contact Person: Mr. Mandeep Singh/ Ms. Akshata Tambe Compliance Officer: Mr. Vikas Agarwal SEBI Registration No.: INM000010411

AXIS CAPITAL LIMITED 1st floor, Axis House, C-2 Wadia International Centre P.B. Marg, Worli, Mumbai- 400025 Tel: +91 22 4325 2525 Facsimile: +91 22 4325 3000 Email: rectaxfree@axiscap.in Website: www.axiscapital.co.in Investor Grievance Email: complaints@axiscap.in Contact Person: Mr. Akash Aggarwal Compliance Officer: Mr. M. Natarajan SEBI Registration No.: INM000012029

EDELWEISS FINANCIALSERVICES LIMITED 14th Floor, Edelweiss House Off CST Road, Kalina, Mumbai 400 098 Maharashtra, IndiaTel: +91 22 4086 5065; Facsimile: +91 22 4086 3610 Email: rec.tfbonds@edelweissfin.com Investor Grievance Email: customerservice.mb@edelweissfin.com Website: www.edelweissfin.com Contact Person: Mr. Hardik Kampani Compliance Officer: Mr. B. Renganathan SEBI Registration No.: INM0000010650

ICICI SECURITIES LIMITED ICICI Centre, H.T. Parekh Marg, Churchgate Mumbai 400020, India Tele: +91 22 2288 2460 Facsimile: +91 22 2282 6580 Email: rec.taxfreebonds@icicisecurities.com Investor Grievance Email: customercare@icicisecurities.com Website: www.icicisecurities.com Contact Person: Mr. Mangesh Ghogle/Mr. Sumit Agarwal Compliance Officer: Mr. Subir Saha SEBI Registration No.: INM000011179

TRUSTEE FOR THE BONDHOLDERS** REGISTRAR TO THE ISSUE

SBICAP TRUSTEE COMPANY LIMITED Appejay House, 6th Floor, 3, Dinshaw Wachhaw Road, Churchgate, Mumbai – 400020 Tel: +91 22 4302 5555; Facsimile: +91 22 4302 5500 Email:corporate@sbicaptrustee.com; Investor Grievance Email: investor.cell@sbicaptrustee.com Website: www.sbicaptrustee.com Contact Person/Compliance Officer: Mr. Ajit Joshi SEBI Registration No.: IND000000536

Karvy Computershare Private Limited Plot No. 17 to 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, Andhra Pradesh, India Toll Free No.1-800-3454001; Tel: +91 40 4465 5000; Facsimile: +91 40 2343 1551 Investor Grievance Email: recl.bonds@karvy.com Website: https:\\karisma.karvy.com Contact Person: Mr. M Murali Krishna Compliance Officer: Mr. Rakesh Santhalia SEBI Registration Number: INR000000221

ISSUE PROGRAMME* ISSUE OPENS ON: [●] ISSUE CLOSES ON:[●]

* The subscription list for the Issue shall remain open for subscription, from 10:00 A.M. to 5:00 P.M during the period indicated above, with an option for early closure or extension as may be decided by the Board of Directors or the Bond Committee. In the event of such early closure or extension of the subscription list of the Issue, our Company shall ensure that public notice of such early closure or extension is published on or before the day of such early date of closure or the Tranche Issue Closing Date, as the case may be, through advertisement/s in at least one leading national daily newspaper.

** SBICAP Trsustee Company Limited has by its letter no. 1470/STCL/DD/201314/CL-771 dated August 14, 2013 given its consent for its appointment as Debenture Trustee to the Issue and for its name to be included in the Prospectus and in all the subsequent periodical communications sent to the holders of the Bonds issued pursuant to this Issue..

mailto:rectfbond@recl.nic.inhttp://www.recindia.nic.in/mailto:rectfbond@recl.nic.inmailto:investor.grievance@akgroup.co.inhttp://www.akcapindia.com/mailto:customercare@icicisecurities.comhttp://www.icicisecurities.com/mailto:corporate@sbicaptrustee.commailto:investor.cell@sbicaptrustee.comhttp://www.sbicaptrustee.com/mailto:recl.bonds@karvy.comhttps://karisma.karvy.com/

TABLE OF CONTENTS

SECTION I – GENERAL ..................................................................................................................................... 1 Definitions and Abbreviations ...................................................................................................................... 1 Certain Conventions, Use of Financial, Industry and Market Data and Currency of Presentation .............. 14 Forward Looking Statements ....................................................................................................................... 15

SECTION II – RISK FACTORS .......................................................................................................................... 16 SECTION III – INTRODCUTION ..................................................................................................................... 36

Summary of Business................................................................................................................................... 36 The Issue ...................................................................................................................................................... 38 Selected Financial Information ................................................................................................................... .44 General Information ..................................................................................................................................... 54 Capital Structure ......................................................................................................................................... 60 Objects of the Issue ...................................................................................................................................... 65 Statement of Tax Benefits ............................................................................................................................ 67

SECTION IV – ABOUT THE COMPANY ......................................................................................................... 71 Industry Overview........................................................................................................................................ 71 Our Business ................................................................................................................................................ 87 Regulations and Policies ............................................................................................................................ 110 History and Certain Corporate Matters ...................................................................................................... 116 Our Management........................................................................................................................................ 129 Organizational Structure Chart .................................................................................................................. 144 Stock Market Data for our Equity Shares/Debentures ............................................................................... 145 Financial Indebtedness (On Standalone Basis) ......................................................................................... 151

SECTION V – LEGAL AND OTHER INFORMATION .................................................................................. 172 Outstanding Litigation and Material Developments .................................................................................. 172 Other Regulatory and Statutory Disclosures .............................................................................................. 183

SECTION VI – ISSUE RELATED INFORMATION ....................................................................................... 187 Issue Structure ............................................................................................................................................ 187 Terms of the Issue ...................................................................................................................................... 193 Issue Procedure .......................................................................................................................................... 206

SECTION VII - MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF THE COMPANY ............... 241 SECTION VIII – OTHER INFORMATION .................................................................................................... 264

Material Contracts and Documents for Inspection ..................................................................................... 264 DECLARATION APPENDIX-I–FINANCIAL INFORMATION OF THE COMPANY ON STANDALONE & CONSOLIDATED BASIS APPENDIX – II – CREDIT RATINGS AND RATIONALE APPENDIX – III – STOCK MARKET DATA FOR DEBENTURES OF THE COMPANY APPENDIX – IV – CONSENT OF TRUSTEE

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SECTION I – GENERAL DEFINITIONS AND ABBREVIATIONS This Draft Shelf Prospectus uses certain definitions and abbreviations, which unless the context indicates or implies otherwise, have the meaning as provide d below. References to statutes, rules, regulations, guidelines and policies will be deemed to include all amendments and modifications notified thereto. Company Related Terms

Term Description “the Company”/“our Company”/ “REC”/the “Issuer”

Rural Electrification Corporation Limited, a public limited company incorporated under the Companies Act, 1956.

“we”/“us”/“our” Our Company together with its subsidiaries, associates and its joint venture on a consolidated basis.

Articles/Articles of Association/ AoA

Articles of Association of our Company as amended from time to time.

Board/Board of Directors Board of Directors of our Company unless otherwise specified. Equity Shares Equity Shares of our Company of the face value of ` 10 each unless

otherwise specified. Memorandum/Memorandum of Association/MoA

Memorandum of Association of our Company as amended from time to time.

Registered Office and Corporate Office

Core 4, SCOPE Complex, 7, Lodhi Road, New Delhi 110 003, India.

RoC Registrar of Companies, National Capital Territory of Delhi and Haryana. Statutory Auditors/Auditors M/s Raj Har Gopal & Co., Chartered Accountants and M/s. P.K. Chopra &

Co., Chartered Accountants. Subsidiaries The direct and indirect subsidiaries of the Company, as mentioned in the

section titled “History and Certain Corporate Matters” on page 116 of this Draft Shelf Prospectus.

Issue Related Terms

Term Description

Allotment/Allot/Allotted The issue and allotment of the Bonds to the successful Applicants, in relation to any Tranche Issue.

Allottee A successful Applicant to whom the Bonds are allotted pursuant to the Issue, either in full or in part.

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

Applicant/Investor A person who makes an offer to subscribe the Bonds pursuant to the terms of the Shelf Prospectus, relevant Tranche Prospectus and Application Form for any Tranche Issue.

Application An application to subscribe to the Bonds offered pursuant to the Issue by submission of a valid Application Form and payment of the Application Amount by any of the modes as prescribed under the respective Tranche Prospectus.

Application Amount The aggregate value of the Bonds applied for by the Applicant, as indicated in the Application Form for any Tranche Issue.

Application Form The form in terms of which the Applicant shall make an offer to subscribe to the Bonds and which will be considered as the application for Allotment of Bonds in the relevant Tranche Issue.

“ASBA”/ “Application Supported by Blocked Amount” or “ASBA Application (s)”

The application (whether physical or electronic) used by an ASBA Applicant to make an Application by authorizing the SCSB to block the Application Amount in the specified bank account maintained with such SCSB.

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Term Description

ASBA Account An account maintained with an SCSB, which will be blocked by such SCSB to the extent of the Application Amount of an ASBA Applicant.

ASBA Applicant Any Applicant who applies for Bonds through the ASBA mechanism. Banker(s) to the Issue/Escrow Collection Bank(s)

The banks which are clearing members and registered with SEBI as bankers to the Issue, with whom the Escrow Accounts and/or Public Issue Accounts and/or Refund Accounts will be opened by the Company and as specified in the relevant Tranche Prospectus.

Base Issue Size The base issue size as defined in the relevant Tranche Prospectus. Basis of Allotment The basis on which Bonds will be allotted to Applicants under the Issue and

which is described in section titled “Issue Procedure” on page 206 of this Draft Shelf Prospectus.

Bonds/Tax Free Bonds Tax Free Secured Redeemable Non Convertible Bonds of face value of ` 1000 each in the nature of Debentures having tax benefits under Section 10(15)(iv)(h) of the Income Tax Act, proposed to be issued by Company under the terms of the Shelf Prospectus and respective Tranche Prospectus.

Bond Certificate (s) Certificate issued to the Bondholder(s) who have applied for Allotment of the Bonds in physical form or in case the Bondholder(s) have opted for rematerialisation of Bonds.

Bond Committee Committee constituted by the Board of Directors in their meeting held on August 08, 2013

Bondholder (s) Any person holding the Bonds and whose name appears in the list of beneficial owners provided by the Depositories (in case of Bonds held in dematerialised form) or whose name appears in the Register of Bondholders maintained by the Issuer/Registrar (in case of Bonds held in physical form).

BSE BSE Limited. CARE Credit Analysis & Research Limited. Category I *# (Institutions)

Public Financial Institutions, scheduled commercial banks, multilateral and bilateral development financial institutions, state industrial development corporations, which are authorised to invest in the Bonds;

Provident funds and pension funds with minimum corpus of ` 25

crores, which are authorised to invest in the Bonds;

Insurance companies registered with the IRDA;

Foreign Institutional Investors and sub-accounts (other than a sub account which is a foreign corporate or foreign individual) registered with SEBI;

National Investment Fund set up by resolution no. F. No. 2/3/2005-

DDII dated November 23, 2005 of the Government of India published in the Gazette of India;

Insurance funds set up and managed by the army, navy or air force of

the Union of India or set up and managed by the Department of Posts, India;

Mutual funds registered with SEBI; and Alternative Investment Funds, subject to investment conditions

applicable to them under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.

Category II*# (Corporates)

Companies within the meaning of section 3 of the Companies Act;

Statutory bodies/corporations; Cooperative banks;

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Term Description Trusts including Public/ private /religious trusts;

Limited liability partnerships;

Regional rural banks and other legal entities incorporated in India and

authorised to invest in the Bonds; and

Partnership firms in the name of partners. *With regard to Section 372A(3) of the Companies Act, 1956, kindly refer to General Circular No. 6/ 2013, dated March 14th, 2013 Ministry of Corporate Affairs, GoI 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 III# (High Networth Individuals) (“HNIs”)

The following investors applying for an amount aggregating to above `10 lakhs across all Series of Bonds in each Tranche Issue: Resident Indian individuals

Hindu Undivided Families through the Karta; and Non Resident Indians on repatriation as well as non-repatriation

basis; Category IV# (Retail Individual Investors) (“RIIs”)

The following investors applying for an amount aggregating upto and including ` 10 lakhs across all Series of Bonds in each Tranche Issue:

Resident Indian individuals;

Hindu Undivided Families through the Karta; and

Non Resident Indians on repatriation as well as non-repatriation basis

#The category may include any other foreign/domestic legal entity(ies) or person as may be permissible under the CBDT Notification and other applicable laws. CDSL Agreement Tripartite agreement dated October 16, 2007 among REC, Registrar and

CDSL for offering depository option to the Bondholders. Collection Centres Collection Centres shall mean those branches of the Bankers to the Issue

that are authorised to collect the Application Forms (other than ASBA) as per the Escrow Agreement to be entered into by the Company, Bankers to the Issue, Registrar and Lead Managers.

Consolidated Bond Certificate A certificate that shall be issued by the Company to the Bondholder(s) for the aggregate face value amount of the Bonds under each Series that are allotted to them in physical form under each Tranche Issue(s) or issued upon rematerialization of Bonds held in dematerialised form.

Consortium Members for marketing of the Issue

[]

Corporates Applications received from Corporates and grouped together under Category II.

Credit Rating Agencies For the present Issue, Credit Rating Agencies are CRISIL, CARE, IRRPL and ICRA.

CRISIL CRISIL Limited. Bond Trust Deed/ Bond Trust cum Hypothecation Deed

Bond trust cum hypothecation deed to be entered into between the Trustee and the Company.

Trustee for the Bondholders/Trustee

Trustee for the Bondholders in this case being SBICAP Trustee Company Limited.

Deemed Date of Allotment The date on which the Board of Directors or Bond Committee approves the Allotment of the Bonds for each Tranche Issue or such date as may be determined by the Board of Directors or Bond Committee and notified to the Stock Exchange. All benefits relating to the Bonds including interest on

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Term Description Bonds (as specified for each tranche by way of Tranche Prospectus) shall be available to the Bondholders from the Deemed Date of Allotment. The actual allotment of Bonds may take place on a date other than the Deemed Date of Allotment.

Demographic Details The demographic details of an Applicant, such as his address, category, bank account details and PAN for printing on refund orders.

Depositories CDSL and NSDL. Designated Branches Such branches of the SCSBs which shall collect the ASBA Applications and

a list of which is available on: http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries or at such other website as may be prescribed by SEBI from time to time.

Designated Date The date on which Application Amounts are transferred from the Escrow Account and ASBA Accounts to the Public Issue Account subject to the necessary systems and infrastructure being in place and any further clarifications, notification, modification, direction, instructions and/or correspondence that may be issued by the NSE, BSE and/or SEBI.

Designated Stock Exchange BSE Direct Online Application The Application made using the online interface and online payment facility

of the stock exchange(s). This facility is available only for demat account holders who wish to hold the Bonds pursuant to the Issue in dematerialised form.

Draft Shelf Prospectus This draft shelf prospectus dated August 16, 2013 filed by the Company with the Designated Stock Exchange for the purpose of seeking public comments in accordance with the provisions of SEBI Debt Regulations.

Electricity Act Electricity Act, 2003. Escrow Account Account opened with the Escrow Collection Bank(s) and in whose favour

the Applicants (other than ASBA Applicants) will issue cheques or demand drafts, in respect of the Application Amount while submitting an Application for each Tranche Issue.

Escrow Agreement Agreement to be entered into amongst the Company, the Registrar to the Issue, the Lead Managers and the Escrow Collection Bank(s) for each Tranche Issue for collection of the Application Amounts (excluding ASBA Applicants).

HNI Portion Applications received from HNIs and grouped together under Category III. ICRA ICRA Limited. IRRPL India Ratings and Research Private Limited. Institutional Portion Applications received from Institutions and grouped together under

Category I. Interest Payment Date The dates on which interest on Bonds shall fall due for payment as specified

in the relevant Tranche Prospectus for a particular Series of Bonds. Issue Public Issue by Rural Electrification Corporation Limited of Tax Free

Secured Redeemable Non Convertible Bonds of Face Value of ` 1000 each in the nature of debentures having tax benefits under Section 10 (15)(iv)(h) of the Income Tax Act, 1961, as amended for an amount aggregating upto the Shelf Limit* (` 5000 crores) by way of issuance of Bonds in one or more tranches in the Fiscal 2014 (each a “Tranche Issue”, and together all Tranche Issues upto the Shelf Limit,“Issue”).. *In pursuance of CBDT Notification, our Company is authorised to raise a minimum of 70% of the allocated limit by way of various tranche(s) 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 in one or more tranche(s) for an amount not exceeding 30% of the allocated limit wherein suitable amount shall be earmarked for Sovereign Wealth Funds, Pension and Gratuity Funds. Our Company shall ensure that Bonds issued through public issue route and private placement route in the Fiscal 2014 shall together not exceed ` 5,000 crores. In case our Company raises funds through private placement route during the process of the present Issue, the Shelf Limit for the Issue shall

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Term Description get reduced by such amount raised and the same shall be disclosed in the respective Tranche Prospectus(es).

Issue Closing Date/ Tranche Issue Closing Date

The date on which the Issue shall close for subscription and the prospective Applicants shall not be allowed to submit their Application Forms as specified in the respective Tranche Prospectus or such other date as may be decided by the Board of Directors/Bond Committee.

Issue Period The period between the Issue Opening Date and the Issue Closing Date inclusive of both days, during which prospective Applicants may submit their Application Forms as specified in the respective Tranche Prospectus.

Issue Opening Date/Tranche Issue Opening Date

The date on which the Issue shall open for subscription and the prospective Applicants may submit their Application Forms as specified in the respective Tranche Prospectus.

Issue Size As specified in the relevant Tranche Prospectus with aggregate issuance amount in all Tranche Prospectus taken together, not exceeding the Shelf Limit.

Lead Managers/ LMs A. K. Capital Services Limited, Axis Capital Limited, Edelweiss Financial Services Limited and ICICI Securities Limited

Market / Trading Lot 1 (One) Bond. Members of the Syndicate Consortium Members for marketing of the Issue, brokers and sub brokers. Notification/ CBDT Notification Notification 61/2013 F.No. 178/37/2013-(ITA.1) dated August 08, 2013

issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India.

NSDL Agreement Tripartite agreement dated November 15, 2007 among REC, Registrar and NSDL executed for offering depository option to the Tranche Bondholders.

Overseas Corporate Body A company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by non-resident Indian and includes overseas trust in which not less than sixty percent beneficial interest is held by non-resident Indian directly or indirectly but irrevocably and which was in existence on the date of commencement of the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) Regulations, 2003 (the Regulations) and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Regulations.

Person Resident in India i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include –

A. A person who has gone out of India or who stays outside India, in

either case- a) for or on taking up employment outside India, or b) for carrying on outside India a business or vocation outside

India, or c) for any other purpose, in such circumstances as would indicate

his intention to stay outside India for an uncertain period;

B. A person who has come to or stays in India, in either case, otherwise than- a) for or on taking up employment in India; or b) for carrying on in India a business or vocation in India, or c) for any other purpose, in such circumstances as would indicate

his intention to stay in India for an uncertain period;

ii) any person or body corporate registered or incorporated in India, iii) an office, branch or agency in India owned or controlled by a person

resident outside India,

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Term Description

iv) an office, branch or agency outside India owned or controlled by a

person resident in India. Person Resident Outside India A person who is not a Person resident in India. Portion/Portions Institutional Portion, Corporates Portion, HNI Portion and Retail Portion are

individually referred to as "Portion" and collectively as "Portions". Prospectus The Shelf Prospectus read along with the Tranche Prospectus for the

relevant Tranche Issue in the Fiscal 2014. Prudential Norms of REC/our Prudential Norms

Prudential norms of REC as approved by our Board of Directors.

Public Issue Account An account opened with the Banker(s) to the Issue to receive monies from the Escrow Accounts and/or the SCSBs for the Issue on the Designated Date.

Record Date 15 (fifteen) days prior to the relevant Interest Payment Date, relevant Redemption Date for Bonds issued under the relevant Tranche Prospectus. In the event the Record Date falls on a Saturday, Sunday or a Public Holiday in New Delhi or any other payment centre notified in terms of the Negotiable Instruments Act, 1881, the succeeding Working Day shall be considered as the Record Date.

Redemption Amount/Maturity Amount

Repayment of the face value amount of Bonds plus any interest that may have accrued on the Redemption Date.

Redemption Date/Maturity Date The date(s) on which the Bonds issued under different Series fall due for redemption as specified in the relevant Tranche Prospectus.

Refund Account The account opened with the Refund Bank(s), from which refunds, if any, of the whole or part of the Application Amount shall be made by the Company to the Applicants (excluding ASBA Applicants).

Refund Bank The Escrow Collection Bank or the Banker(s) to the Issue from which refunds, if any, of the whole or part of the Application Amount shall be made by the Company to the Applicants (excluding ASBA Applicants) as mentioned in the Tranche Prospectus.

Register of Bondholders The register of Bondholders maintained by the Issuer/Registrar/Depositories in accordance with the provisions of the Companies Act, 1956 and as more particularly detailed in section titled “Terms of the Issue” on page 193 of this Draft Shelf Prospectus.

Registrar to the Issue/ Registrar Registrar to the Issue in this case being Karvy Computershare Private Limited Registrar MoU Memorandum of Understanding dated August 14, 2013 entered into

between the Company and the Registrar to the Issue. Residual Shelf Limit In relation to each Tranche Issue, this shall be the Shelf Limit less the

aggregate amount of Bonds allotted under all previous Tranche Issue(s) and aggregate amount of Bonds issued through private placement route, if any.

Retail Portion Applications received from RIIs and grouped together under Category IV. Security The Bonds issued by the Company will be secured by way of first / pari

passu charge on the book debts of the Company, other than those that are exclusively charged/earmarked to any trustee/lender(s) of the Company, and/or any other security as may be agreed between the Company and the Trustee, pursuant to the terms of the Bond Trust cum Hypothecation Deed with a minimum security cover of one time of the aggregate face value of Bonds outstanding at all times.

“Self Certified Syndicate Banks” or “SCSBs”

The banks which are registered with SEBI under the Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994, as amended and offer services in relation to ASBA, including blocking of an ASBA Account, a list of which is available on: http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries or at such other website as may be prescribed by SEBI from time to time.

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Term Description

Series Bondholder (s) Holder(s) of the Bond(s) of a particular Series issued under a Tranche Issue. Series of Bonds/Series A series of Bonds, which are identical in all respects including but not

limited to terms and conditions, listing and ISIN number (in the event that Bonds in a single Series of Bonds carry the same coupon rate) and as further stated to be an individual "Series" in the relevant Tranche Prospectus.

Shelf Limit The aggregate limit of the Issue being ` 5,000 crores*, as allocated by the CBDT Notification, to be issued by the Company in one or more Tranche Issues in the Fiscal 2014 * In pursuance of CBDT Notification, our Company is authorised to raise a minimum of 70% of the allocated limit by way of various tranche(s) 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 in one or more tranche(s) for an amount not exceeding 30% of the allocated limit wherein suitable amount shall be earmarked for Sovereign Wealth Funds, Pension and Gratuity Funds. Our Company shall ensure that Bonds issued through public issue route and private placement route in the Fiscal 2014 shall together not exceed ` 5,000 crores. In case our Company raises funds through private placement route during the process of the present Issue, the Shelf Limit for the Issue shall get reduced by such amount raised and the same shall be disclosed in the respective Tranche Prospectus(es).

Shelf Prospectus The shelf prospectus to be filed by our Company with the RoC, Stock Exchange and SEBI pursuant to the provisions of the SEBI Debt Regulations.

Stock Exchange BSE. Syndicate ASBA Application Locations/ Specified Cities

Application centres at Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur, Bengaluru, Hyderabad, Pune, Vadodara and Surat where the Members of the Syndicate shall accept ASBA Applications.

Syndicate SCSB Branches In relation to ASBA Applications submitted to a Member of the Syndicate, such branches of the SCSBs at the Syndicate ASBA Application Locations named by the SCSBs to receive deposits of the Application Forms from the Members of the Syndicate, and a list of which is available on http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries or at such other website(s) as may be prescribed by SEBI from time to time.

“Transaction Registration Slip” or “TRS”

The acknowledgement slip or document issued by any of the Members of the Syndicate, the SCSBs, or the Trading Members as the case may be, to an Applicant upon demand as proof of registration of his Application for the Bonds.

Trading Members Intermediaries registered as brokers or sub-brokers with the stock exchanges under the applicable byelaws, rules, regulations, guidelines, circulars issued by the stock exchanges from time to time, and duly registered with the stock exchange(s) for collection and electronic upload of Application Forms on the electronic application platform provided by such stock exchange.

Tranche Issue Issue of Bonds as per the terms specified in each Tranche Prospectus. Tranche Prospectus The tranche prospectus containing the details of Bonds including interest,

other terms and conditions, recent developments, general information, objects, procedure for application, statement of tax benefits, regulatory and statutory disclosures and material contracts and documents for inspection of the relevant Tranche Issue.

Tripartite Agreements Agreements entered into between the Issuer, Registrar and each of the Depositories under the terms of which the Depositories agree to act as depositories for the securities proposed to be issued by the Issuer.

Trustee Agreement Agreement dated August 14, 2013 executed between the Company and the Trustee.

Working Days A Working Day shall mean 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 Issue Period, Interest

file:///C:/Users/Nilesh/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/My%20Documents/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/L89BVSNS/file:///C:/Users/Nilesh/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/My%20Documents/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/L89BVSNS/

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Term Description Payment Date 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 in terms of the Negotiable Instruments Act, 1881.

Conventional and General Terms or Abbreviations Term/Abbreviation Description/ Full Form

` or Rs. or Rupees Indian Rupees (the lawful currency of India) $ or US$ or USD United States dollar (the lawful currency of the United States of America) € or Euro or Eur Euro (the official and lawful currency of European Union, which consists of

17 of the 28 member states i.e. Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain)

¥ or Yen or JPY Japanese Yen (the lawful currency of the Japan) AA Appellate Authority Act/ Companies Act The Companies Act, 1956 AGM Annual General Meeting/Additional General Manager (as context may

require) ALM Asset Liability Management APGENCO Andhra Pradesh Power Generation Corporation Limited AS Accounting Standards as notified by Institute of Chartered Accountants of

India ASSOCHAM The Associated Chambers of Commerce and Industry of India BD Business Development BEE Bureau of Energy Efficiency BoB Bank of Baroda BPC Bid Process Coordinator BPL Below Poverty Line BPLR Benchmark Prime Lending Rate CAG Comptroller and Auditor General of India CAR Capital Adequacy Ratio CAT Corporate Accounts and Taxation CBDT Central Board of Direct Taxes CC-PR Corporate Communication – Public Relation CDSL Central Depository Services (India) Limited CEO Chief Executive Officer CERC Central Electricity Regulatory Commission CGSL Classic Global Securities Limited CHFor Fr or SFr Swiss franc (the official currency of Switzerland and Liechtenstein) CII Confederation of Indian Industry CIT Commissioner of Income Tax CMD Chairman and Managing Director CoR Certificate of Registration CP Corporate Planning CPSE Central Public Sector Enterprise CPSU Central Public Sector Undertaking CPUs Central Power Utilities

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Term/Abbreviation Description/ Full Form

CRAR Capital to Risk Weighted Assets Ratio CS Company Secretary CSEB Chattisgarh State Electricity Board CSPDCL Chhattisgarh State Power Distribution Company Limited CSR Corporate Social Responsibility DDG Decentralised Distributed Generation Debt Listing Agreement The agreement for listing of debt securities on the Stock Exchange Debt Recovery Act The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 Depositories Act The Depositories Act, 1996 Depository(ies) CDSL and NSDL DIN Director Identification Number DIPP Department of Industrial Policy & Promotion, Ministry of Commerce &

Industry DoEA Department of Economic Affairs, Ministry of Finance, Government of India DoFS Department of Financial Services, Ministry of Finance, Government of

India DP/ Depository Participant Depository Participant as defined under the Depositories Act, 1996 DPE Department of Public Enterprises, Ministry of Heavy Industries & Public

Enterprises DRR Debenture Redemption Reserve DRT Debt Recovery Tribunal DRUM Distribution Reform, Upgrades and Management DSIJ Dalal Street Investment Journal DSM Demand Side Management DTC Direct Tax Code DVC Damodar Valley Corporation ED Executive Director Eds Electricity Departments EESL Energy Efficiency Services Limited ERP Enterprise Resource Planning ESCOs Energy Service Companies ESI Act Employees State Insurance Act, 1948 F&A Finance and Accounts FC Financial Concurrence FDI Foreign Direct Investment FEMA Foreign Exchange Management Act, 1999 FII Foreign Institutional Investor FIMMDA Fixed Income Money Market and Derivative Association of India Fin Finance Financial Year/Fiscal/ FY Period of 12 months ended March 31 of that particular year FPO Follow on Public Offer GDP Gross Domestic Product Gen. Generation GoI or Government Government of India GVSS Gramin Vidyut Sahkari Samiti GW Giga Watt

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Term/Abbreviation Description/ Full Form

HDFC HDFC Bank Limited HR Human Resources HRM Human Resource Management HUDCO Housing and Urban Development Corporation Limited HUF Hindu Undivided Family HVDS High Voltage Distribution Systems IA Internal Audit IAS Indian Administrative Services ICAI Institute of Chartered Accountants of India IEX Indian Energy Exchange Limited IFRS International Financial Reporting Standards IFSC Indian Financial System Code IIFCL India Infrastructure Finance Company Limited Income Tax Act/ IT Act Income Tax Act, 1961 India Republic of India Indian GAAP Generally accepted accounting principles followed in India IPO Initial Public Offer IRDA Insurance Regulatory and Development Authority IREDA Indian Renewable Energy Development Agency Limited IT Information Technology ITAT Income Tax Appellate Tribunal ITCL IL&FS Trust Company Limited ITSL IDBI Trusteeship Services Limited JICA Japan International Cooperation Agency JVA Joint Venture Agreement KfW Kreditanstalt fur Wiederaufbau KSEB Karnataka State Electricity Board Kv Kilo Volt KWh KiloWatt hour KYC Know Your Customer LIBOR London Inter-Bank Offer Rate LIC Life Insurance Corporation of India LIL Lynx India Limited LVDS Low Voltage Distribution Systems MCA Ministry of Corporate Affairs, Government of India MICR Magnetic Ink Character Recognition MoF Ministry of Finance, Government of India MoP Ministry of Power, Government of India MoU Memorandum of Understanding MP Madhya Pradesh MPERC Madhya Pradesh Electricity Regulatory Commission MPMKVVCL Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited MPPOKVVCL Madhya Pradesh Poorv Kshetra Vidyut Vitran Company Limited MPPSKVVCL Madhya Pradesh Pachim Kshetra Vidyut Vitran Company Limited MPSEB Madhya Pradesh State Electricity Board

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Term/Abbreviation Description/ Full Form

MSETCL Maharashtra State Electricity Transmission Company Limited MSPGCL Maharashtra State Power Generation Company Limited NAPCC National Action Plan for Climate Change NBFC Non Banking Financial Company, as defined under applicable RBI guidelines NBFC-ND Non-Deposit Taking NBFC NECS National Electronic Clearing System NEF National Electricity Fund NEFT National Electronic Fund Transfer NIPFP National Institute of Public Finance and Policy NMEEE National Mission for Enhanced Energy Efficiency NR Non-Resident NRI Non Resident Indians i.e. a Person resident outside India, as defined under

FEMA, and who is a citizen of India or a Person of Indian origin and such term as defined under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000

NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited NTP National Tariff Policy OSD Officer on Special Duty P&C Parliament & Coordination p.a. per annum PAN Permanent Account Number PAT Profit After Tax PFC Power Finance Corporation Limited PFI Public Financial Institution, as defined under Section 4A of the Companies

Act PGCIL Power Grid Corporation of India Limited PIO Public Information Officer PLR Prime Lending Rate PM Project Monitoring PMDO Pooled Municipal Debt Obligation PPP Public Private Partnership PSE Public Sector Enterprise PSPCL Punjab State Power Corporation Limited. PSTCL Punjab State Transmission Corporation Limited QFIs Qualified Foreign Investors R&TA Registrar & Share Transfer Agent RBI Reserve Bank of India RE Renewable Energy RECLU Rural Electrification Corporation Limited Employees’ Union RECPDCL REC Power Distribution Company Limited RECTPCL REC Transmission Projects Company Limited Reg S Regulation S under Securities Act, 1933 RGGVY Rajeev Gandhi Grameen Vidyutikaran Yojna RIICO Rajasthan State Industrial and Investment Corporation Limited RM Resource Mobilisation

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Term/Abbreviation Description/ Full Form

RMC Risk Management Committee RoC Registrar of Companies, National Capital Territory of Delhi and Haryana RTGS Real Time Gross Settlement RTI Right to Information SARFAESI / Securitization Act Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 SBF Small is Beautiful Fund SBH State Bank of Hyderabad SBI State Bank of India SC Screening Committee SD Sustainable Development SEBI Securities and Exchange Board of India SEBI Act Securities and Exchange Board of India Act, 1992 SEBI Debt Regulations SEBI (Issue and Listing of Debt Securities) Regulations, 2008

SLR Bonds Bonds that qualify under statutory liquidity ratio to be maintained by banks/other institutions as prescribed by the RBI from time to time

STUs State Transmission Utilities SVIL Silicon Valley Infotech Limited T&D Transmission and Distribution TCSC Thyristor Controlled Series Compensation The Gratuity Act Payment of Gratuity Act, 1972 u/s under Section UAN Unique Acknowledgement Number UCO UCO Bank UCX Universal Commodity Exchange Limited UNDP United National Development Programme UP Uttar Pradesh UPCL Uttarakhand Power Corporation Limited UPPCL Uttar Pradesh Power Corporation Limited USA United States of America VTL Vizag Transmission Limited w.e.f with effect from WBSECA West Bengal State Electrical Contractors Association Business / Industry Related Terms

Term/Abbreviation Description/ Full Form

ADB Asian Development Bank ALCO Asset Liability Management Committee APDRP Accelerated Power Development and Reform Program AT&C Aggregate Technical and Commercial CAGR Compounded Annual Growth Rate CDM Clean Development Mechanism CEA Central Electricity Authority CIRE Central Institute for Rural Electrification Corporation DISCOM/Discom Distribution Company DMS Distribution Management System/Document Management System

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Term/Abbreviation Description/ Full Form

DPE Department of Public Enterprises, GoI GENCO/Genco Generation Company ECBs External Commercial Borrowings IC&D International Co-operation & Development IFC Infrastructure Finance Company IPP Independent Power Producer ISO International Organization for Standardization ITP Independent Transmission Project(s) JNNSM Jawaharlal Nehru National Solar Mission MNRE Ministry of New and Renewable Energy MW Mega Watts NHPC NHPC Limited NPAs Non-Performing Assets NPCIL Nuclear Power Corporation of India Limited NPEL National Power Exchange Limited NTPC NTPC Limited PECAP Power Equity Capital Advisors Private Limited PEIL Power Exchange India Limited PSU Public Sector Undertaking PV Photovoltaic R-APDRP Restructured Accelerated Power Development and Reform Programme SEB(s) State Electricity Boards SERC State Electricity Regulatory Commission SIA SCADA Implementing Agencies SPU State Power Utility(ies) SPV Special Purpose Vehicle TRANSCO/Transo Transmission Company UMPP Ultra Mega Power Project USAID United States Agency for International Development USPP United State Private Placement

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CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCY OF PRESENTATION Certain Conventions All references in this Draft Shelf Prospectus to “India” are to the Republic of India and its territories and possessions. Financial Data Unless stated otherwise, the financial data in this Draft Shelf Prospectus is derived from (i) our audited standalone financial statements, prepared in accordance with Indian GAAP and the Companies Act for the Fiscal 2013, 2012, 2011, 2010 and 2009; and/or (ii) our audited consolidated financial statements, prepared in accordance with Indian GAAP and the Companies Act for the Fiscal 2013, 2012, 2011, 2010 and 2009 and/or (iii) limited review of standalone financial for the first quarter ended on June 30, 2013. In this Draft Shelf 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 two decimal points. The current financial year of the Company commences on April 1 and ends on March 31 of the next year, so all references to particular “financial year”, “fiscal year” and “Fiscal” or “FY”, unless stated otherwise, are to be 12 months period ended on March 31 of that year. The degree to which the Indian GAAP financial statements included in this Draft Shelf Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Draft Shelf Prospectus should accordingly be limited. Industry and Market Data Any industry and market data used in this Draft Shelf Prospectus consists of estimates based on data reports compiled by government bodies, professional organizations and analysts, data from other external sources and knowledge of the markets in which we compete. These publications generally state that the information contained therein has been obtained from publicly available documents from various sources believed to be reliable but it has not been independently verified by us or its accuracy and completeness is not guaranteed and its reliability cannot be assured. Although we believe that the industry and market data used in this Draft Shelf Prospectus is reliable, but the same has not been independently verified by us. The data used in these sources may have been reclassified by us for purposes of presentation. Data from these sources may also not be comparable. The extent of the meaningfulness of the industry and market data, presented in this Draft Shelf Prospectus, depends upon the reader's familiarity with and understanding of the methodologies used in compiling such data. There are no standard data gathering methodologies in the industry in which we conduct our business and methodologies and assumptions may vary widely among different market and industry sources. Currency and Unit of Presentation In this Draft Shelf Prospectus, references to “`”, "Rs." and “Rupees” are to Indian Rupees i.e. the legal currency of India; references to “$”, “USD”, and “U.S. dollars” are to United States dollar i.e. the lawful currency of the United States of America; references to “Euro” and “€” are to Euro i.e. the official and lawful currency of 17 countries of European Union; references to “Yen” and “JPY” are to Japanese yen i.e. the legal currency of Japan; and references to “CHF” are to the Swiss franc i.e. legal currency of Switzerland and Liechtenstein. Unless the context otherwise require for the purposes of this Draft Shelf Prospectus data will be given in ` in crores. In this Draft Shelf Prospectus, any discrepancy in any table between total and the sum of the amounts listed are due to rounding off. Exchange Rates The exchange rates (`) of the US$, JPY, € and CHF as for last 5 years are as provided below:

Currency March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012^ March 31, 2013* 1 USD 50.95 45.14 44.65 51.16 54.39 100 JPY 51.87 48.44 54.02 62.43 57.76 1 Euro 67.48 60.56 63.24 68.34 69.54 1 CHF - - - 56.63 56.97 (Source: www.rbi.org.in and as per REC accounting policies) ^ March 31, 2012 was a trading holiday; hence, exchange rates for last working day, i.e., March 30, 2012 have been used. *March 31, 2013 was a trading holiday; hence, exchange rates for last working day, i.e., March 28, 2013 have been used.

http://www.rbi.org.in/

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FORWARD LOOKING STATEMENTS We have included statements in this Draft Shelf Prospectus which contain words or phrases such as “will”, “aim”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “project”, “should”, and similar expressions or variations of such expressions, that are forward-looking statements. Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to:

changes in the policies or support of the GoI to our business or industry; the performance of our loan assets and our ability to secure payment thereon; our ability to finance our indebtedness as it comes due and to obtain the additional financing necessary

to grow our business; our ability to maintain low cost of funds and the continued availability to us of low cost borrowings; changes in Indian and international interest rates; the continued availability to us of tax benefits; our ability to implement our strategy and manage our growth effectively; possible contingent liabilities and uninsured losses; our ability to grow our asset portfolio; our ability to comply with restrictive covenants under our indebtedness and manage our business

within those restrictions; the outcome of legal proceedings in which we are or may become involved; our ability to compete effectively; our dependence on our management team and skilled personnel; risks associated with the projects we finance; general economic and business conditions in the Indian power sector or the Indian economy; changes to the regulations that govern us and our borrowers; our ability to obtain, renew or comply with regulatory licenses; our ability to respond to competitive conditions; our ability to successfully implement our strategy; our ability to anticipate trends in our current business lines and respond suitably; changes in political conditions in India and internationally; governmental and regulatory actions that may affect our business or our industry. For further discussion on factors that could cause our actual results to differ, see the section titled “Risk Factors” on page 16 of this Draft Shelf Prospectus. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually may occur in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company, nor the members of the Consortium, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company, Lead Managers will ensure that Investor(s) are informed of material developments until such time as the grant of trading permission by the Stock Exchange for our Bonds pursuant to the Issue.

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SECTION II – RISK FACTORS The Investor should carefully consider all the information in this Draft Shelf Prospectus, including the risks and uncertainties described below, and under “Our Business”on page 87 and under “Financial Statements” as Appendix-I of this Draft Shelf Prospectus, before making an investment in the Bonds. The risks and uncertainties described in this section are not the only risks that we currently face. 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, prospects, results of operations and financial condition. If any of the following or any other risks actually occur, our business prospects, results of operations and financial condition could be adversely affected and the price of, and the value of your investment in the Bonds could decline and 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 the 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 the other. In this section, unless the context otherwise requires, a reference to “the Company” and “our Company” is a reference to REC and unless the context otherwise requires, a reference to “we”, “us” and “our” refers to REC and its Subsidiaries, joint ventures and associate companies, as applicable in the relevant fiscal period, on a consolidated basis. In this Section, all figures are on standalone basis unless otherwise mentioned. Internal Risk Factors

1. Our business and the industry where we profess our business are dependent on the policies and

support of the Government of India and we are susceptible to changes to such policies and the level of support we receive. If the changes in Government policies are not in favour of our business, then the same are likely to adversely affect our business, financial condition and results of our operations.

We are a GoI owned company operating in a regulated industry. Our business and our industry are dependent, directly and indirectly, on the policies and support of the GoI in many significant ways, including, the cost of our capital, the financial strength of our borrowers, the management, growth of our business, our industry and our overall profitability. Historically, we have been able to reduce our cost of capital and reliance on commercial borrowings because of various forms of assistance received from the GoI. Currently, we have been receiving tax concessions with respect to certain types of our bonds that enable us to price such bonds at a lower rate of interest than would otherwise be available to us. We also benefit from direct tax benefits provided by the GoI. The GoI also influences the nature of our business in a number of ways. In particular, the GoI establishes the schemes in which we and our borrowers participate. Like any other public sector undertakings, the GoI can also influence or determine key decisions about our Company including, dividends and the appointment of Directors of our Board. Additionally, the GoI may implement policies which may not be consistent with our business objectives. For example, although we intend to continue to diversify our asset portfolio and continue to increase our power generation related lending activity, but our lending capacity is not unlimited and the GoI could seek refocusing of our lending capacity on transmission and distribution projects in rural areas. As the GoI regulates the industry in which our borrowers operate, hence, our borrowers may also get significantly impacted by the policies of the GoI in a variety of ways. For example, the GoI has established a number of schemes and provided incentives that provide benefits to power projects that have enhanced the financial viability of the projects and the financial position of our borrowers. Additionally, the GoI has in the past assisted us in procuring the repayment of our loans from our borrowers. Furthermore, the growth of our business is dependent upon the continued growth of the power sector and the overall Indian economy, which may significantly get impacted by the policies of the GoI. Any unfavourable change in the government policies or any variation in the level of direct or indirect support to us, as provided by the GoI, in these or other areas could have a material adverse effect on our business, financial condition and results of our operations.

2. We have a significant concentration of outstanding loans to certain borrowers and if the loans to

these borrowers become non-performing, the quality of our asset portfolio may get adversely affected.

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We are a power sector-specific public financial institution. This sector has a limited number of borrowers primarily comprising of public sector utilities (State Power Utilities and State Electricity Boards), many of these public sector utilities are loss-making and therefore may not have liquidity to repay their borrowings. Our past exposure has been, and future exposure is anticipated to be, concentrated towards these borrowers. As on March 31, 2013, we had aggregate loans outstanding to state sector borrowers of ` 108403.71 crores, which constituted about 85.12% of our total loans outstanding. Historically, state sector utilities have had relatively weak financial position and have in the past also defaulted on their indebtedness. Consequently, we have had to restructure loans sanctioned to certain SEBs, which resulted in our having to reschedule their loans and waive a part of their interest dues on account of such restructuring. There can be no assurances that the applicable SEBs and SPUs will be able to perform under the terms of the rescheduled loans. As on March 31, 2013, our single borrower having the largest amount of outstanding loans accounted for 8.05% of our total outstanding loans and the borrower group to which we had the largest amount of outstanding loans in the aggregate accounted for 16.36% of our total outstanding loans. As on March 31, 2013 the top ten individual borrowers to whom we had the largest amount of outstanding loans in the aggregate accounted for 45.27% of our total outstanding loans and top ten borrower groups to which we had the largest amount of outstanding loans in the aggregate accounted for 79.88% of our total outstanding loans. For further details, see the section titled “Our Business” on page 87 of this Draft Shelf Prospectus. In addition to our exposure to borrowers resulting from our outstanding loans, we may also have exposures to borrowers, including the top ten individual borrowers and borrower groups referred to above, in the form of unfunded loan sanctions.

Any negative trends or financial difficulties, particularly among the borrowers and borrower groups to whom we have the greatest exposure, including SEBs and SPUs, could increase the level of NPAs in our portfolio and that may make us unable to service our outstanding indebtedness. For the foreseeable future, we expect to continue to have a significant concentration of loans to certain borrowers, including SEBs and SPUs. Credit losses on the individual borrowers or borrower groups to whom, as well as the projects in respect of which, we have the greatest exposure could have a material adverse effect on our business, financial condition and results of our operations. Furthermore, as we continue to increase our exposure to generation projects, our individual loan size is expected to increase, thereby increasing our exposure with respect to individual projects.

3. We are involved in various legal proceedings. Any unfavourable development in these proceedings

may have an adverse effect on financial conditions of the Company.

We are involved in various legal proceedings, which are pending before various Courts, Tribunals and other Authorities. A summary of the same is provided hereunder:

S. No. Nature of the cases/claims No. of cases outstanding

Approximate amount involved (` in crores)

1. Income tax proceedings 9 29.33 2. Civil suits and consumer cases 26 N.A. 3. Arbitration proceedings 3 5.24 4. Miscellaneous proceedings 3 N.A. Total 41 34.57

If any of our ongoing legal proceedings or future legal proceedings are not resolved in our favour, and if our insurance coverage or any applicable indemnities are insufficient to cover the damages awarded against us, in those circumstances, we may be required to make substantial payments or we may be required to make appropriate provisions in our financial statements, which could have a material adverse effect on our business, financial condition and results of operations.

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For further details, see the section titled “Outstanding Litigation and Material Developments” on page 172 of this Draft Shelf Prospectus.

4. Our competitive efficiency is dependent on our ability to maintain a low and effective cost of funds; if we are unable to do so it could have a material adverse effect on our business, financial condition and results of our operations.

Our ability to compete effectively is dependent on our ability to maintain a low effective cost of funds. Historically, our access to funds has been enhanced and our cost of funds has been reduced by equity financing and loans received directly from the GoI, as well as tax concessions with respect to, and guarantees of, certain types of our bonds and borrowings that enable us to price such borrowings at a lower rate of interest than would have been otherwise available to us. For further details, see the section titled “Our Business” on page 87 of this Draft Shelf Prospectus.. Further, competition in our industry depends on, among other things, the ongoing evolution of GoI and state government policies relating to the power and finance industries, the entry of new participants into the industry and the extent to which existing participants in our industry seek to expand their exposure to the power sector.

There can be no assurances as to the level of direct or indirect support as may be provided to us by the GoI. If there are any unfavourable changes in the policies of the GoI in future, the same could materially increase the cost of funds available to us. In particular, the GoI has not provided us any direct funding since 2001. Similarly, the GoI has not allowed us to issue SLR bonds since Fiscal 1999. In addition, since January 2007 the GoI has limited the amount of our bonds that an individual investor can utilise to offset capital gains to ` 0.50 crore, which has reduced the amount of bonds that we have been able to offer for subsequent periods. Consequently, our dependency on funding from the debt capital markets and commercial borrowings has increased significantly. Further, the allocation of amount in respect of tax-free bonds is subject to CBDT notification issued by MoF and we may not be able to issue such bonds prospectively. As a result of these and other factors, our Company’s cost of funds is 7.52% for Fiscal 2013 which, may be increased during subsequent periods. While generally we have been able to pass the increased cost of funds onto our customers over this period, but we may not continue to be able to do so in future. In particular, financially stronger SPUs and private sector borrowers may seek to source their funds directly from the market if our loan products are not competitively priced, where our ability to price our products depends on our cost of capital.

Our ability to continue to obtain funds from the debt capital markets and through commercial borrowings on acceptable terms will depend on various factors including, in particular, our ability to maintain our credit ratings (which are based upon several factors and many of which are outside our control including, the economic conditions in the power sector and the Indian economy, the liquidity in the domestic and global debt markets, which has been severely restricted during the recent financial crisis and may be in the future). There can be no assurances as to whether we will be able to maintain our existing ratings. Any deterioration of our ratings (if any) could materially increase the cost of funds available to us, particularly from the debt capital markets and commercial borrowings. Furthermore, certain of our existing commercial borrowings require us to pay increased rates of interest and/or to repay the loan in its entirety in the event of a ratings downgrade. Our borrowing costs have been competitive in the past due to direct and indirect benefits, including financing we have received from the GoI in future and as a result of our strong credit ratings, which may also be dependent on our relationship with the GoI. If we are unable to access funds at an effective cost that is comparable to or lower than our competitors, whether due to a change in GoI policy or a reduction in our credit rating or due to other factors, we may not be able to offer competitive interest rates to our borrowers, which could adversely affect our profitability and growth, which would have an adverse affect on our business, financial condition and results of operations.

If we are not able to maintain a low effective cost of funds then, we may not be able to competitively price our loans and, accordingly, we may not be able to maintain the profitability or growth of our business, which could have a material adverse effect on our business, financial condition and results of operations.

5. We may face asset liability mismatches, which could affect our liquidity and consequently have a

material and adverse effect on our business, financial performance and results of operation.

We may face potential liquidity risks due to varying periods over which our assets and liabilities

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mature. We currently fund our business in significant part through the use of borrowings that have shorter maturities than the maturities of all of our new substantial loan assets. In particular, in recent years we have obtained funding through the issuance of 54EC – capital gain tax exemption bonds. These bonds are subject to tax concessions for the benefit of bondholders that enable us to price such bonds at a lower rate of interest than would otherwise be available to us and thereby reduce our cost of capital. However, these bonds require a holding period of three years from the date of allotment for the bondholders to receive the benefit of these tax concessions and automatically redeemed at the end of three years from allotment. For additional information with respect to our issuances of 54EC long term tax exemption bonds, see the section titled “Our Business” on page 87 of this Draft Shelf Prospectus. Our term loans, which constitute the largest component of our loan assets, typically have a maturity of more than ten years. As on March 31, 2013, we had long-term borrowings outstanding of ` 105311.17 crores, which constituted 83.95% of our outstanding long term loan assets. Additionally, our other financial products may have maturities that exceed the maturities of our borrowings.

To the extent we fund our business through the use of borrowings that have shorter maturities than the loan assets we disburse, our loan assets will not generate sufficient liquidity to enable us to repay our borrowings as they become due, and we will be required to obtain new borrowings to repay our existing indebtedness. There can be no assurances that new borrowings will be available on favourable terms or at all. In particular, we are increasingly reliant on funding from the debt capital markets and commercial borrowings. The market for such funds is competitive and our ability to obtain funds on acceptable terms will depend on various factors including, in particular, our ability to maintain our credit ratings, which are based upon several factors, many of which are outside our control including the economic conditions in the power sector and the Indian economy, and the liquidity in the domestic and global debt markets, which has been severely restricted during the recent financial crisis and may be in the future.

Any inability to obtain new borrowings, on favourable terms or otherwise, may negatively impact the profitability and growth of our business, which could have an adverse affect on our business, financial condition and results of operations.

6. Our Statutory Auditors have made an observation in their annexure to auditor’s reports on our

audited financial statements for Fiscal 2013.

Our Statutory Auditors have made an observation in their annexure to auditors’ reports on our audited financial statements for Fiscal 2013, as mentioned below: In our opinion and according to information and explanations given to us, internal controls are generally commensurate with the size of the Company and nature of its business. However, in certain areas internal control needs further strengthening like utilisation of grants/subsidy received under various schemes, monitoring and supervision of loans given to various SEBs/DISCOMS/ TRANSCOS/GENCOS including obtaining search reports for charges created against the loans given, physical verification of assets charged to REC as security after commercial operation date; regular updating of loan module and generation of various reports from loan module in ERP to have better control over loan assets.

7. If we are unable to manage our growth effectively, our business and financial results could be

adversely affected.

Our business has experienced meaningful growth in scope and size since we began operations in 1969. We began financing projects outside the area of rural transmission and distribution much later in our Company's history. Since 2001, funding for generation projects has constituted an increasingly larger portion of our business. The size of the projects that we finance has increased. Further, vide its letter dated September 17, 2010, RBI has further categorised us as an IFC therefore, REC can now increase its exposure to private sector borrowers. We intend to continue to grow our business in both scope and size, particularly with respect to generation projects, which could place significant demands on our operational, credit, financial and other internal risk controls. In addition, in September 2009, our mandate was further extended to include financing other activities with linkages to power projects, such as coal and other mining activities, fuel supply arrangements for the power sector and other power-related infrastructure.

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We expect that our asset growth will be primarily funded by the issuance of new debt. We may have difficulty in obtaining funding on attractive terms. Adverse developments in the Indian credit markets, such as increases in interest rates may increase our debt service costs and the overall cost of our funds and impair our ability to manage our recent growth or to continue to grow our business. Any inability to manage our growth effectively could have a material adverse effect on our business, financial condition and results of operations. Furthermore, because of our recent growth and the long gestation period for power sector investments, our historical financial statements may not be an accurate indicator of our future financial performance.

8. We are currently engaged in foreign currency borrowings and we are likely to do so at increased

levels in the future, which will expose us to fluctuations in foreign exchange rates and if we are unable to hedge the risk effectively, it could adversely affect our business, financial condition and results of operations.

As on March 31, 2013, we had foreign currency borrowings outstanding equal to ` 15238.19 crores out of which 5.73% is the unhedged position of our total borrowings and we are likely to obtain additional foreign currency borrowings in the future, although we believe that our foreign currency hedging with respect to our existing foreign currency borrowings is effective, but there can be no assurances that it will remain effective or that we will enter into effective hedging with respect to any new foreign currency borrowings. We expect to increase our foreign currency borrowing in the future and therefore, we may be further exposed to fluctuations in foreign currency rates. Volatility in foreign exchange rates and our inability, if any, to hedge the risk effectively could adversely affect our business, financial condition and results of operations.

9. We are susceptible to the volatility in interest rates in our operations and therefore, we may adversely

get affected due to the fluctuation in interest rates.

We are susceptible to the volatility in interest rates in our operations. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political and other conditions and other factors. Due to these factors, interest rates in India have historically experienced and may continue to experience a relatively high degree of volatility. A substantial portion of our loan assets, including all of our long-term loans, permits the borrowers to seek repricing of their loans after three or ten years. As on March 31, 2013 we had non current loan assets outstanding of ` 114529.34 crores. When interest rates decline, our borrowers may increasingly seek re-pricing of our loans to them based on the terms of their loan agreements or due to commercial considerations resulting from competitive conditions, which would result in us realising a lower rate of return on our capital committed to the re-priced loans and adversely affect our profitability, particularly if we did not have the ability to reprice our borrowings. Additionally, if we are unable or unwilling to competitively re-price our loans, we may have to face greater levels of prepayments on our loans. In a decreasing interest rate environment, prepayments may also result in a lower rate of return because we may not be able to redeploy the capital in assets yielding similar rates of return, and any prepayment premium we receive may not fully offset these lower rates of return. When interest rates rise, we may be more susceptible to such increases than our competitors that have access to lower cost funds, particularly if we have a higher portion of floating rate borrowings or borrowings with shorter durations than that of our competitors. Further, most of our borrowings are fixed rate borrowings and in a falling interest rate scenario, this may impact our results of operations and financial condition.

Our treasury operations are also susceptible to volatility in interest rates and any adverse movement in interest rates, though not quantifiable, may adversely impact the value of our treasury operations, and consequently may have an adverse effect on our business, prospects, financial condition and results of operations.

10. The GoI holds a majority of our Equity Shares and therefore it can determine the outcome of

shareholder voting and influence our operations.

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At present, the GoI owns 66.80% of our paid up share capital. Consequently, the GoI, acting through the MoP, will continue to control us and will have the power to elect and remove our directors and therefore determine the outcome of most of our proposals for corporate action requiring approval of our Board or shareholders, including with respect to the payment of dividends. In addition, the GoI influences our operations through its various departments and policies. Under our Articles of Association, the GoI may issue directives with respect to the conduct of our business or our affairs or impose other restrictions on us. In particular, given the importance of the power industry to the economy, the GoI could require us to take actions designed to serve the public interest in India and not necessarily to maximize our profits. For further details on our Articles of Association, see the section titled “Main Provisions of the Articles of Association of the Company” on page 241 of this Draft Shelf Prospectus.

11. We take advantage of certain tax benefits available to us as a lending institution. If these tax benefits

were reduced or no longer available to us it would adversely affect our profitability.

We have received and we are currently receiving certain tax benefits by virtue of our status as a lending institution, including as a result of our lending within the infrastructure sector, which have enabled us to reduce our effective tax rate. For Fiscal 2009, Fiscal 2010, Fiscal 2011, Fiscal 2012 and Fiscal 2013, our Company’s effective tax liability as a percentage (computed by dividing our Company’s standalone current tax liability by profit before tax, as per our Company’s standalone financial statements) was 26.35%, 26.20%, 26.12%, 25.70% and 26.06% respectively, compared to statutory corporate tax rates (including surcharge and cess) of 33.99%, 33.99%, 33.22%, 32.45% and 32.45% in Fiscal 2009, Fiscal 2010, Fiscal 2011, Fiscal 2012 and Fiscal 2013, respectively. The availability of these tax benefits are subject to the policies of the GoI, among other things, and there can be no assurances as to the amount of tax benefits that we will receive in the future, if any. If the laws or regulations regarding these or other tax benefits were to change further, our taxable income and tax liability may increase, which may adversely affect our financial condition and results of operations.

12. We may not have obtained sufficient security and collateral from our borrowers, or we may not be

able to recover or enforce, or there may be a delay in recovering or enforcing, the expected value from any security and collateral which could have a material adverse effect on our business, financial condition and results of operations.

We have historically granted certain loans to our borrowers where the value of the security for the loan may be less than the amount of the loan, where we have funded the loan prior to obtaining security or where the loans have been granted without security. As on March 31, 2013, we had total loan assets outstanding of ` 127355.54 crores, of which ` 93697.39 crores, or 73.57%, were secured by charges on assets, ` 30403.59 crores, or 23.87% which were backed by way of state government guarantee and ` 3254.56 crores, or 2.56%, were unsecured loan assets. Although legislation in India are now effective enough to strengthen the rights of creditors to obtain faster realization of collateral in the event of loan default, we may nonetheless not be able to realise the full value of our collateral due to certain factors, including delays occasioned by the fact that the loan was granted by us as a part of consortium of lenders or delays in us taking immediate action in bankruptcy foreclosure proceedings, market downturns that affect the value of the collateral, defects in the perfection of collateral and fraudulent transfers by borrowers. Further, upon