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PROJECT REPORT ON INFRASTRUCTURE BOND

SUBMITTED TO UNIVERSITY OF MUMBAI

FOR ACADAMIC YEAR: 2011-2012

IN PARTIAL FULLFILLMENT FOR THE REQUREMENT OF 5th SEMESTER B.COM FINANCIAL MARKET DEGREE

SUBMITTED BY MUKESH N. SAROJ ROLL NO: 24

VIVA COLLEGE OF ARTS, COMMERCE & SCIENCE VIRAR (W)

DECLARATION
I hereby declare that the project titled INFRASTRUCTURE BOND is an original work prepare by me and is being submitted to university of Mumbai in partial fulfilment of B.COM FINANCIAL MARKET degree for academic year 2011-2012. To the best of my knowledge, this report has not been submitted earlier to this university or to any other affiliated college for the fulfilment of BFM degree.

Signature:

Name: Mukesh N. Saroj

Roll no: 24

Exam seat no:

Place: VIVA College, Virar (w)

Date:

ACKNOWLEDGEMENT I Master MUKESH SAROJ from T.Y.B.COM FINANCE MARKET would like to pay credits for all those who helped in making of this project & so I would like to thanks those who influenced my project in order to achieve the desire results correctly.

The First & foremost part in accomplishment of in this project is our Principal Dr.R.D.BHAGAT, Co-ordinator Prof, Prajakta Paranjape, and Guide Prof. Vasanti Shenoy & teaching & non-teaching staff of Viva College. I would like to pay the gratitude for their help without which it would have been impossible for me to attain the desired performance level.

I would like to pay the gratitude for the help received by my parents & friend. Lastly, I am thankful to all those who directly & indirectly helped in my project.

INDEX
Sr.no 1 2 3 4 5 6 TOPIC I RISK FACTORS COMPANY LISTING TERMS OF THE ISSUE BRIEF PROFILE OF DIRECTORS OF THE COMPANY 7 8 9 10 11 12 COMPANY PROFILE PTC INDIA LIMITED (PROMOTER) PRODUCT & SERVICES INVESTMENTS IN ENERGY VALUE CHAIN INDUSTRY OUTLOOK ORGANIZATION OF THE POWER INDUSTRY IN INDIA 13 PROVIDERS OF FINANCE TO THE POWER SECTOR IN INDIA 14 CAPITAL STRUCTURE OF THE COMPANY Pg.no

15

CONCLUSION

INTRODUCTION
This Information Memorandum (document/IM) is neither a Prospectus nor a Statement in Lieu of Prospectus or an invitation to the Public to subscribe to the Infrastructure Bonds issued by PTC India Financial Services Limited (PFS) (the Issuer/ the Company) and is prepared in accordance with Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 issued vide Circular No. LAD-NRO/GN/2008/13/127878 dated June 06, 2008. This IM is not intended for distribution and is for the consideration of the person to whom it is addressed and should not be reproduced / redistributed by the recipient. It cannot be acted upon by any person other than to whom it has been specifically addressed. Multiple copies hereof given to the same entity shall be deemed to be offered to the same person. The securities mentioned herein are being issued strictly on a private placement basis and this offer does not constitute a public offer/invitation. This Information Memorandum is not intended to form the basis of evaluation for the potential investors to whom it is addressed and who are willing and eligible to subscribe to these Infrastructure Bonds issued by PFS. This IM has been prepared to give general information regarding PFS to parties proposing to invest in this issue of Infrastructure Bonds and it does not purport to contain all the information that any such party may require. PFS and the Arrangers do not undertake to update this Information Memorandum to reflect subsequent events and thus it should not be relied upon without first confirming its accuracy with PFS. Potential investors are required to make their own independent valuation and judgment before making the investment and are believed to be experienced in investing in debt markets and are able to bear the economic risk of investing in the Bonds. It is the responsibility of potential investors to have obtained all consents, approvals or authorizations required by them to make an offer to subscribe for, and purchase the Bonds. Potential investors should not rely solely on information in the Information Memorandum or by the Arrangers nor would providing of such information by the Arrangers be construed as advice or recommendation by the Issuer or by the Arrangers to subscribe to and purchase the Bonds. Potential investors also acknowledge that the Arrangers do not owe them any duty of care in respect of their offer to subscribe for and purchase of the Bonds. It is the responsibility of potential investors to also ensure that they will sell these Bonds in strict accordance with this IM and other applicable laws, and that the sale does not constitute an offer to the public within the meaning of the Companies Act, 1956. Potential investors should also consult their own tax advisors on the

tax implications of the acquisitions, ownership, sale and redemption of Bonds and income arising thereon.

SECURITIES & EXCHANGE BOARD OF INDIA


This Disclosure Document has not been filed with Securities & Exchange Board of India (SEBI). The Securities have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or adequacy of this document. It is to be distinctly understood that this document should not, in any way, be deemed or construed to have been cleared or vetted by SEBI. SEBI does not take any responsibility either for the financial soundness of any scheme or the project for which the Issue is proposed to be made, or for the correctness of the statements made or opinions expressed in this document. The issue of Bonds being made on private placement basis, filing of this document is not required with SEBI. However, SEBI reserves the right to take up at any point of time, with PFS, any irregularities or lapses in this document.

RISK FACTORS

(A) FORWARD-LOOKING STATEMENTS


While no forecasts or projections relating to the Companys financial performance are included in this Information Memorandum, this document contains certain forward-looking statements like intends/believes/expects and other similar expressions or variations of such expressions. These statements are primarily meant to give Investors an overview of the Companys future plans, as they currently stand. The Company operates in a highly competitive, regulated and ever-changing business environment, and a change in any of these variables may necessitate an alteration of the Companys plans. Further, these plans are not static, but are subject t continuous internal review, and may be altered if the altered plans are perceived to suit the Companys needs better. Further, many of the plans may be based on one or more underlying assumptions (all of which may not be contained in this Information Memorandum) which may not come to fruition. Thus, actual results may differ materially from those suggested by the forward-looking statement. The Company cannot be held liable by estoppel or otherwise for any forward-looking statement contained herein. The Company and all intermediaries associated with this Information Memorandum do not undertake to inform Investors of any changes in any matter in respect of which any forward-looking statements are made. All statements contained in this Information Memorandum that are not statements of historical fact constitute forward-looking statements and are not forecasts or projections relating to the Companys financial performance. All forward-looking statements are subject to risks, uncertainties and assumptions that may cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that may cause actual results to differ materially from the Companys expectations include, among others: General economic and business conditions in India; The Companys ability to successfully implement its strategy and growth Changes in Indian or international interest rates; The level of non-performing assets in its portfolio; Rate of growth of its loan assets; Potential mergers, acquisitions or restructurings and increased competition; plans; The Companys ability to compete effectively and access funds at competitive cost;

Changes in tax benefits and incentives and other applicable regulations, including various tax laws; The Companys ability to retain its management team and skilled personnel; Changes in laws and regulations that apply to NBFCs in India, including laws that impact its lending rates and its ability to enforce its collateral; and Changes in political conditions in India.

(These are only illustrative and not exhaustive) By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither the Company nor any of its Directors nor any of their respective affiliates have any obligation, or intent 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.

(B) PRESENTATION OF FINANCIALS AND USE OF MARKET DATA


Unless stated otherwise, the financial information used in this Information Memorandum is derived from the Companys financial statements for the period April 1, 2009 to March 31, 2010, being the statutory year ended March 31, 2010 and prepared in accordance with Indian GAAP and the Companies Act, 1956 as stated in the report of the Companys Statutory Auditors, Price Waterhouse, Chartered Accountants (statutory auditors of the company for financial year 2008- 09), included in this Information Memorandum. In addition to the financial information for the financial year 2009-10, the financial information related to audited accounts for the half year ended on September10 is also used and the same has been audited by Companys Statutory Auditor for FY 2010-11, M/s Deloitte Haskins & Sells. The Issuers fiscal year commences on April 01 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a Fiscal Year are to the Fiscal Year ended March 31 of the reference year. Fiscal 2010 for instance, refers to the Fiscal year ended March 31, 2010. In this Information Memorandum, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding off. Unless stated otherwise, macroeconomic and industry data used throughout this Information Memorandum has been obtained from

publications prepared by providers of industry information, Government sources and multilateral institutions. Such publications generally state that the information contained therein has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although the Issuer believes that industry data used in this Information Memorandum is reliable, it has not been independently verified.

(C) INTERNAL/EXTERNAL RISK FACTORS


The following are the risks envisaged by the management, and Investors should consider the following risk factors carefully for evaluating the Company and its business before making any investment decision. Unless the context requires otherwise, the risk factors described below apply to PTC India Financial Services Limited only. The risks have been quantified wherever possible. If any one of the following stated risks actually occurs, the Companys business, financial conditions and results of operations could suffer and therefore the value of the Companys debt securities could decline. Note: Unless specified or quantified in the relevant risk factors, the Company is not in a position to quantify the financial or other implications of any risk mentioned herein below:

INTERNAL RISK FACTORS (a) Bond Redemption Reserve


No Bond Redemption Reserve is being created for issue of BONDs in pursuance of this Information Memorandum. Management Perception: Creation of Bond Redemption Reserve is not required for the propose issue of Bonds. The MCA vide General Circular No.9/2002; No. 6/3/2001-CL.V dated April 18, 2002 has clarified that NBFCs need not create a Bond Redemption Reserve as specified under section 117C of the Companies Act, 1956, in respect of privately placed Bonds.

(b) Credit Risk


The Company carries the risk of default by borrowers and other counterparties. Management Perception: Any lending and investment activity is exposed to credit risk arising from the risk of repayment default by the borrowers and counterparties. The Company has institutionalized a systematic credit evaluation process monitoring the performance of its asset portfolio on a regular and continual basis to detect any material development, and also constantly evaluates the changes and developments in sectors to which it has substantial exposure. The Company also undertakes a periodic review of its entire asset portfolio with a view to determine the portfolio valuation, identify potential areas of action and devise appropriate strategies thereon. The Company follows a conservative provisioning and writeoff policy, which is in line with what is prescribed by the RBI.

(c) Contingent Liabilities


The Companys contingent liabilities could adversely affect its financial condition. Management Perception: As on September 30, 2010, PFS had no contingent liabilities on account of income-tax/interest-tax/sales-tax liabilities in respect of matters in appeal and bond executed in respect of legal matters.

(d) Non-Performing Assets (NPA)


If the level of NPAs in the Companys portfolio were to increase, its business would suffer. Management Perception: The Gross and Net NPAs of PFS as on September 30, 2010, were zero respectively. PFS is fully complying with the RBI Guidelines/Directives in connection

with the same. The Company believes that its overall financial profile, capitalization levels and risk management systems, provide significant risk mitigation.

(e) Interest Rate Risk


The Companys business is largely dependent on interest income from its operations. Management Perception: The Company is exposed to interest rate risk principally as a result of lending to customers at interest rates and in amounts and for periods, funding sources (institutional/bank borrowings and debt offerings). The Company seeks to match its interest rate positions to minimize interest rate risk. Despite these efforts, there can be no assurance that significant interest rate movements will not have an effect on its results of operations. Interest rates are highly sensitive to many factors beyond its control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions, inflation and other factors. Due to these factors, interest rates in India have historically experienced a relatively high degree of volatility. Nevertheless the endeavour of the Company will be to keep the interest rate risk at minimum levels by proactively synchronizing resource rising and lending activities on an ongoing basis.

(f) Access to Capital Markets and Commercial Borrowings


The Companys growth will depend on its continued ability to access funds at competitive rates. Management Perception: With the growth of its business, the Company is increasingly reliant on funding from the debt capital markets and commercial borrowings. The market for such funds is competitive and its ability to obtain funds at competitive rates will depend on various factors, including its ability to maintain its credit ratings. While its borrowing costs have been competitive in the past due to its credit rating and the quality of its asset portfolio, if the Company is unable to access funds at an effective cost that is comparable to or lower than its competitors, the Company may not be able to offer competitive interest rates for its loans. This may adversely impact its business, its future financial performance. The value of its collateral may decrease or the Company may experience delays in enforcing its collateral when its customers default on their obligations, which may result in failure to recover the expected value of collateral and adversely affect its financial performance. The Company has also filed its Draft Red Herring Prospectus with market regulator i.e. SEBI on December 22, 2010, for its proposed fund raising exercise through Initial Public Offering (IPO).

(g) A ailment of foreign currency borrowings in the future, which will expose Company to fluctuations in currency exchange rates, which could adversely affect its business, financial condition and results of operations.
While PFS currently do not have any foreign currency borrowings, it may avail foreign currency borrowings in the future. As an IFC, PFS is eligible to raise external commercial borrowings without prior RBI approval up to 50.00% of its Owned Funds and are likely to avail significant external commercial borrowings in the future. In October 2010, the Company has also entered into a loan agreement with Deutsche Infestations - und Entwicklungsgesellschaft me H ("DEG") for an aggregate amount of U.S. $26 million for onlending to renewable energy projects and therefore may be exposed to fluctuations in currency exchange rates in the future. Although PFS may enter into hedging transactions with respect to its foreign currency borrowings, there can be no assurance that any such measure will be effective or that PFS will enter into effective hedging with respect to any new foreign currency borrowings. Volatility in currency exchange rates could adversely affect Companys business, financial condition and results of operations and the price of its Equity Shares.

(h) Failure to recover the expected value of collateral when borrowers default on their obligations to Company may adversely affect its financial performance.
As of September 30, 2010, all loans were secured by project assets. For debt provided on a senior basis, PFS generally seek a first ranking pair passu charge on the project assets. For loans provided on a subordinated basis, PFS generally seek to have a pari passu charge on the project assets. Although we seek to maintain a collateral value to loan ratio of at least 1.25:1 for our secured loans, an economic downturn or other project risks could result in a fall in collateral values. Moreover, foreclosure of such collateral may require court or tribunal intervention that may involve protracted proceedings and the process of enforcing security interests against collateral can be difficult. Additionally, the realizable value of all collateral in liquidation may be lower than its book value. PFS cannot guarantee that it will be able to realize the full value of its collateral, due to, among other things, defects in the perfection of collateral, delays on its part in taking immediate action in bankruptcy foreclosure proceedings, stock market downturns, claims of other lenders, legal or judicial restraint and fraudulent transfers by borrowers. In the event a specialized regulatory agency gains

jurisdiction over the borrower, creditor actions can be further delayed. In addition, to put in place an institutional mechanism for the timely and transparent restructuring of corporate debt, the RBI has devised a corporate debt restructuring system. Any failure to recover the expected value of collateral security could expose PFS to a potential loss. Apart from the RBI guidelines, PFS may be a part of a syndicate of lenders the majority of whom elect to pursue a different course of action than the Company would have chosen. Any such unexpected loss could adversely affect business, prospects, results of operations and financial condition.

EXTERNAL RISK FACTORS


(a) Material changes in Regulations to which the Company is subject could cause the Companys business to suffer Management Perception: NBFCs in India are subject to detailed supervision and regulation by the RBI. NBFCs not accepting public deposits are exempt from most such provisions. The Company is subject generally to changes in Indian law, as well as to changes in Government regulations and policies and accounting principles. The RBI also requires the Company to make provisions in respect of NPAs. The provision made is equal to or higher than that prescribed under the prudential norms. Any changes in the regulatory framework affecting NBFCs including the provisioning for NPAs or capital adequacy requirements could adversely affect the profitability of the Company or its future financial performance, by requiring a restructuring of its activities, increasing costs or otherwise.

(b) Risk of competition in lending and resource raising could cause the Companys business to suffer Management Perception: PFS offers a financial products and services, such as Term Loans and Bridge Loans, catering to varied cross section of customers. The management believes that the Companys brand equity, reach and strategic alliances along with its resource base would provide the necessary strength to perform well in a competitive market. (c) A slowdown in economic growth in India could cause the Companys business to suffer

Management Perception: The Companys performance and the quality and growth of its assets are necessarily dependent on the health of the overall Indian economy. A slowdown in the Indian economy could adversely affect its business, including its ability to grow its asset portfolio, the quality of its assets, and its ability to implement its strategy. Indias economy could be adversely affected by a general rise in interest rates, or various other factors affecting the growth of industrial, manufacturing and services sector or general down trend in the economy.

Notes to Risk Factors:


Save, as stated elsewhere in this Information Memorandum, since the date of publishing audited financial accounts contained in this Information Memorandum: (a) No material developments have taken place that are likely to materially affect the performance or prospects of the Company; and (b) No developments have taken place in the last nine months which materially and adversely affect the profitability of the Company or the value of its assets, or its ability to pay its liabilities within the next 12 months.

COMPANY
PTC India Financial Services Ltd (PFS or Issuer or Company) is offering for subscription, on private placement basis, secured, redeemable, non-convertible Long Term Infrastructure Bonds of the face value of Rs. 5,000/- each for cash at par with benefits under Section 80CCF of the Income Tax Act, 1961 termed as PFS LONG TERM INFRASTRUCTURE NON- CONVERTIBLE BONDS (INFRASTRUCTURE BONDs). The minimum application shall be for 1 Bond of Rs. 5,000/- each and in multiples of 1 Bond thereafter.

AUTHORITY FOR THE ISSUE


This issue is being made pursuant to the Resolution of the Board of Directors of the Company passed at its meeting held on March 22, 2010 and the Committee of Directors for Bond Issuance of the Company, passed at its Meeting held on January 27, 2011 and is made under appropriate provisions of the Income Tax Act, 1961.

ISSUE SIZE
PFS (the Issuer or the Company) proposes to raise Rs. 30 Crore, with a green-shoe option, to retain over-subscription by issuance of additional Infrastructure Bonds up to Rs. 70 Crore, in that case the total issue size may be up to Rs. 100 Crore, through issue of Secured, Redeemable, Non-Convertible Long Term Infrastructure Bonds face value of Rs.5,000 each for cash at par with benefits under section 80CCF of the Income Tax Act, 1961 termed as PFS LONG TERM INFRASTRUCTURE BONDS - SERIES 1 (Infrastructure Bonds) by way of private placement (the Issue). The allotment of Bonds will be made on First-cum-first serve basis (as per records of Company) and Company will monitor the Issue collection on daily basis. In case of over subscription of the issue, the applications received over and above of the Issue size may be rejected or the Company may allot the entire application/s received on Closing date through pro-rata basis or draw of lot or the Company may adopt any other mode as may be deemed fit by the Company at its sole discretion so that the total Issue size could not exceed Rs. 100 Crore.

OBJECTS OF THE ISSUE


The proceeds shall be utilized towards infrastructure lending as defined by the Reserve Bank of India in the Guidelines issued by it from time to time, after meeting the expenditures of, and raised through this issue.

CREDIT RATING
Brickwork has assigned BWR AA (Pronounced Double A with Stable outlook) rating to the Bonds of the Company aggregating to Rs. 100 Crores letter Ref No. BWR/BLR/RA/201011/0274 on January 31, 2011. A copy of rating letter from Brickwork is enclosed elsewhere in this Disclosure Document Instrument with this rating are considered to offer High Credit quality in terms of timely payment of debt obligations. A copy of rating letter from Brickwork is enclosed elsewhere in this Disclosure Document ICRA has assigned LA+ (pronounced L A plus) rating to the Bonds of the Company aggregating to Rs.100 crores letter Ref no. D/RAT/2010-11/P48/9 on February 3, 2011. This rating is considered to offer adequate credit quality for timely servicing of debt obligations. A copy of rating letter from ICRA is enclosed elsewhere in this Disclosure Document. Other than rating mentioned hereinabove, the Company has not sought any other credit rating from any other credit rating agency (ies) for the Bonds offered for subscription under the terms of this Disclosure Document. The above ratings are not a recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The rating agencies have the right to suspend, withdraw the rating at any time on the basis of new information etc.

LISTING
The Secured Redeemable Long Term Infrastructure Non-Convertible Bonds Series 1 of PFS is proposed to be listed on the Wholesale Debt Market (WDM) Segment of the National Stock Exchange of India Ltd. (NSE). The Company has obtained an in-principle approval from the NSE for listing of said Bonds on its Wholesale Debt Market (WDM) Segment. The Company the Bonds to be issued and allotted under this Disclosure Document and complete all the formalities relating to listing of the Bonds within 70 days from the date of closure of the Issue. If such permission is not granted within 70 days from the date of closure of the Issue or where such permission is refused before the expiry of the 70 days from the closure of the Issue, the Company shall forthwith repay without interest, all monies received from the applicants in pursuance of the Disclosure Document, and if such money is not repaid within 8 days after the Company becomes liable to repay it (i.e. from the date of refusal or 70 days from the date of closing of the subscription list, whichever is earlier), then the Company and every director of the Company who is an officer in default shall, on and from expiry of 8 days, will be jointly and severally liable to repay the money, with interest at the rate of 15 per cent per annum on application money, as prescribed under Section 73 of the Companies Act, 1956.

REGISTRAR
M/s Karvy Computershare Pvt Limited has been appointed as Registrar to the Issue. The Registrar will monitor the applications while the private placement is open and will coordinate the post private placement activities of allotment, dispatch of interest warrants etc. Investors can contact the Registrar in case of any post-issue problems such as non receipt of letters of allotment; demat credit, refund orders, interest on application money.

TRUSTEES
IDBI Trusteeship Services Limited has given its consent to act as the Trustee to the proposed Issue and for its name to be included in this Information Memorandum. All remedies of the Bond holder(s) for the amount due on the Bond will be vested with the Trustees on behalf of the Bond holders. The holders of the Bond shall without any further act or deed be deemed to have irrevocably given their consent to and authorised the trustees to do inter-alia, all acts, deeds, and things necessary for servicing the Bond being offered including any payment by the Company to the Bond holders / Bond Trustee, as the case may be, shall, from the time of

making such payment, completely and irrevocably discharge the Company pro tanto from any liability to the Bond holders..

FUTURE RESOURCE RAISING


PFS will be entitled to borrow/raise loans or avail financial assistance both from domestic and international market as also issue Bonds/Equity Shares/Preference Shares/other securities in any manner having such ranking pari passu or otherwise and on terms and conditions as PFS may think fit without the consent of or intimation to Bond holders or Trustees in this connection.

PERMISSION/ CONSENT FROM PRIOR CREDITORS


The Company hereby confirms that it is entitled to raise money through current issue of Infrastructure Bonds without the consent/permission/approval from the Bond holders/Trustees/ Lenders/other creditors of PFS. Further the Bonds proposed to be issued under the terms of this Information Memorandum being secured there is no requirement for obtaining permission/consent from the prior creditors.

TERMS OF THE ISSUE


The following are the terms and conditions of Bonds being offered under this Information Memorandum for an aggregate amount of up to Rs. 100 Crore for the financial year 20102011.

1. STATUS OF THE BOND


The Infrastructure Bonds shall be non-convertible and secured. These bonds carry tax benefit under section 80CCF of Income Tax Act, 1961 (up to a maximum of Rs.20, 000/- per applicant) and these Long Term Infrastructure Bonds are being issued in terms of Notification No. [48/2010/F No 149/84/2010-SO (TPL)] dated 09th July, 2010 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, and RBI certificate no. N-14.03116 dated 23rd August 2010; a copy of the RBI certificate is annexed to this Memorandum. In accordance with Section 80CCF of the Income Tax Act, 1961 the amount, not exceeding Rs. 20,000 per annum, paid or deposited as subscription to Long-Term Infrastructure Bonds during the previous year relevant to the assessment year beginning April 01, 2011 shall be deducted in computing the taxable income of a resident individual or HUF. In the event that any Applicant subscribes to the Bonds in excess of Rs. 20,000, the foretasted tax benefit shall be available to such Applicant only to the extent of Rs. 20,000. Eligible investors can apply for up to any amount of the Bonds across any of the Series(s) or a combination thereof. The investors will be allotted the total number of Bonds applied for in accordance with the Basis of Allotment.

2. FORM
a) The allotment of the Bonds shall be made in physical and dematerialized form both. The Company has made depository arrangements with National Securities Depository Limited ("NSDL") and Central Depository Services (India) Limited ("CDSL", and together with NSDL, the "Depositories") for issue of the Bonds in a dematerialized form. The Company shall take necessary steps to credit the Depository Participant account of the Applicants with the number of Bonds allotted. b) In case of Bonds that are rematerialized and held in physical form, the Company will issue one certificate to the Bond holder for the aggregate amount of the Bonds that are rematerialized and held by such Bond holder (each such certificate a "Consolidated Bond Certificate"). In respect of the Consolidated Bond Certificate(s), the Company will, upon receipt of a request from the Bond holder within 30 days of such request,

split such Consolidated Bond Certificates into smaller denominations, subject to a minimum denomination of one Bond. No fees will be charged for splitting any Consolidated Bond Certificates but, stamp duty, if payable, will be paid by the Bond holder. The request to split a Consolidated Bond Certificate shall be accompanied by the original Consolidated Bond Certificate which will, upon issuance of the split Consolidated Bond Certificates, be cancelled by the Company.

3. FACE VALUE
The face value of each Bond is Rs. 5,000/-.

4. TITLE
In case of: 1. Bonds held in the dematerialized form, the person for the time being appearing in the register of beneficial owners maintained by the Depository; and

2. the Bond held in physical form, the person for the time being appearing in the Register of bondholders (as defined below) as Bond holder, shall be treated for all purposes by the Company, the Bond Trustee, the Depositories and all other persons dealing with such person as the holder thereof and its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, theft or loss of the Consolidated Bond Certificate issued in respect of the Bonds and no person will be liable for so treating the Bond holder. No transfer of title of a Bond will be valid unless and until entered on the Register of Bond holders or the register of beneficial owners maintained by the Depository prior to the Record Date. In the absence of transfer being registered, interest, Buyback Amount and/or Maturity Amount, as the case may be, will be paid to the person, whose name appears first in the Register of Bond holders maintained by the Depositories and/or the Company and/or the Registrar, as the case may be. In such cases, claims, if any, by the purchasers of the Bonds will need to be settled with the seller of the Bonds and not with the Company or the Registrar. The provisions relating to transfer and transmission and other related matters in respect of the Company's shares contained in the Articles of Association of the Company and the Companies Act shall apply, mutatis mutandis (to the extent applicable) to the Bond (s) as well.

5. LISTING
The Bonds are proposed to be listed on NSE.

6. NOMINATION
In accordance with Section 109A of Companies Act, 1956, the sole Bond holder or first bondholder, along with other joint bondholders [being individual(s)] may nominate any one person (being an individual) who, in the event of death of sole holder or all the joint holders, as the case may be, shall become entitled to the Bond(s). Nominee shall be entitled to the same rights to which he will be entitled if he were the registered holder of the Bond(s). Where nominee is a minor, the Bondholders may make a nomination to appoint any person to become entitled to the Bond(s), in the event of their death, during the minority. A buyer will be entitled to make a fresh nomination in the manner prescribed. When the Bond is held by two or more person, the nominee shall become entitled to receive the amount only on the demise of all the Bond holders. The Bond holders are advised to provide the specimen signature of the nominee to the company to expedite the transmission of Bond(s) to the nominee in the event of demise of Bond holders. In dematerialized mode, there is no need to make a separate nomination with the Company.

7. TRANSFER OF BONDs
a) Register of Bondholders: The Company shall maintain at its registered office or such other place as permitted by law a register of Bondholders (the "Register of Bondholders") containing such particulars as required by Section 152 of the Companies Act. In terms of Section 152A of the Companies Act, the Register of Bondholders maintained by a Depository for any Bond in dematerialized form under Section 11 of the Depositories Act shall be deemed to be a Register of Bondholders for this purpose.

b) Lock in Period: In accordance with the Notification, the Bondholders shall not sell or transfer the Bonds in any manner for a period of 5 years from the Deemed Date of Allotment (the "Lock-in Period"). The Bondholders may sell or transfer the Bonds after the expiry of the Lock-in Period on the stock exchange where the Bonds are listed. These Bonds can also be

pledged, hypothecated or given on lien for obtaining loans from Scheduled Commercial Banks after the lock-in period of five years.

c) Transmission of Bonds: However, transmission of the Bonds to the legal heirs in case of death of the Bondholder / Beneficiary to the Bonds is allowed.

d) Transfer of Bonds held in dematerialized form: In respect of Bonds held in the dematerialized form, transfers of the Bonds may be effected only through the Depository(ies) where such Bonds are held, in accordance with the provisions of the Depositories Act, 1996 and/or rules as notified by the Depositories from time to time. The Bondholder shall give delivery instructions containing details of the prospective purchaser's Depository Participant's account to his Depository Participant. If a prospective purchaser does not have a Depository Participant account, the Bondholder may rematerialize his or her Bonds and transfer them in a manner as specified below. The transferee(s) should ensure that the transfer formalities are completed prior to the Record Date. If a request for transfer of the Bond is not received by the Registrar before the Record Date for maturity, the Maturity Amount for the Bonds shall be paid to the person whose name appears as a Bondholder in the Register of Bondholders. In such cases, any claims shall be settled inter se between the parties and no claim or action shall be brought against the Company.

e) Succession: In the event of demise of the holder(s) of the Bonds, PFS will recognise the executor or administrator of deceased bondholder, being an individual / HUF, or the holder of the succession certificate or other legal representative, being an individual / HUF as having title to the Bonds. PFS shall not be bound to recognise such executor, administrator, or holder of succession certificate, unless such executor or administrators obtains probate or letter of administration or such holder is the holder of succession certificate or other legal representation, as the case may be, from a Court of India having jurisdiction over the matter. PFS may at its absolute discretion, where it thinks fit, dispense with production of probate or letter of administration or succession certificate or other legal representation, in order to recognise such holder, being an individual / HUF as being entitled to the Bonds standing in the name of the deceased bond holder(s) on production of documentary proof or indemnity. All requests for registration of transmission along with requisite documents should be sent to the Registrars.

8. DEEMED DATE OF ALLOTMENT


The Deemed Date of Allotment shall be March 25, 2011. All benefits under the Bond including payment of interest will accrue to the Bondholders from the Deemed Date of Allotment.

9. SUBSCRIPTION
Issue opens on February 09, 2011 Issue closes on *March 15, 2011 * Issue date may be change at sole discretion of Company.

10. INTEREST
a) Annual Payment of Interest: For Option I (subject to buyback, as applicable) & Option III Bonds, interest will be paid annually commencing from the Deemed Date of Allotment and on the equivalent date falling every year thereafter.

b) Cumulative Payment of Interest: Interest on Option II & IV Bonds shall be Compounded annually commencing from the Deemed Date of Allotment and shall be payable on the Maturity Date or the Buyback Date, as the case may be.

c) Day Count Convention: Interest shall be computed on a 365 days-a-year basis on the principal outstanding on the Bonds. However, where the interest period (start date to end date) includes February 29, interest shall be computed on 366 days-a-year basis, on the principal outstanding on the Bonds.

d) Interest on Application and Refund Money: The Company shall not pay any interest on refund of Application Amount, in whole or part. However, interest on Application Money, to the extent of allotment of bonds, shall be paid on first interest payment date (i.e. 25 March 2012 for all options), from the date of credit of this money to the bank account of PFS to the date immediately preceding the deemed date of allotment at the respective coupon rates.

11. REFUND
In case of rejection of the application on account of technical grounds or receipt of application after the closure of the issue, refund without interest will be made within a period of 30 days from the deemed date of allotment of the bonds.

12. REDEMPTION
Unless previously redeemed as per the terms of the Bond, the Company shall redeem the Bonds on the Maturity Date i.e. March 25, 2021 PFSs liability to Bondholder(s) towards all their rights including payment of face value shall cease and stand extinguished up on redemption of the Bonds Series 1 in all events. Further PFS will not be liable to pay any interest, income or compensation of any kind after the date of such Redemption of the Bonds(s).

Bonds held in electronic form: No action is required on the part of Bondholders at the time of maturity of the Bonds. On the redemption date, redemption proceeds would be paid by NECS/At Par Cheque/Demand Drafts to those Bondholders, whose names appear on the list of beneficial owners given by the depository to PFS. These names would be as per the depositorys record on the record date/book closure date fixed for the purpose of redemption. These Bonds will be simultaneously extinguished.

Bonds held in physical form: No action will ordinarily be required on the part of the Bondholder at the time of redemption and the maturity amount will be paid to those Bondholders whose names appear in the Register of Bondholders maintained by the Company or Registrar on the Record Date fixed for the purpose of redemption. However, the Company may require that the Consolidated Bond Certificate(s), duly discharged by the sole holder or all the joint-holders (signed on the reverse of the Consolidated Bond Certificate(s) to be surrendered for redemption on Maturity Date and sent by registered post with acknowledgment due or by hand delivery to the Registrar or Company or to such persons at such addresses as may be notified by the Company from time to time. Bondholders shall have to surrender the Consolidated Bond Certificate(s) in the manner as stated above, not more than three months and not less than two months prior to the Maturity Date so as to facilitate timely payment. In case of transmission applications pending on the record date, the

redemption proceeds will be issued to the legal heirs after the confirmation of the adequacy and correctness of the documentation submitted with such application till such time, the redemption proceeds will be kept in abeyance.

13. INTERIM EXIT ROUTES


These Bonds shall be listed at NSE. The investors shall have the right to exit through the secondary market, but only after completion of the lock-in period of five years from the date of allotment. In respect of the Bonds having buyback facility, the investors can exit either through secondary market or through buyback route.

14. BUYBACK OF BONDS


In respect of Bonds with buyback option, exit facility shall be available at the end of 5th, 6th, 7th, 8th and 9th year. The investors, who opt and are allotted Bonds with buyback facility and wish to exit through this facility, shall have to apply for buy back by writing to the Company early. Redemption Notice for PFS Long Term Infrastructure Bond Series 1) of his/her intention to redeem all the Bonds held by him/her under the buyback option. Such early Redemption Notice from the Bondholder should reach the Registrar or the Company between January 1 to January 31, starting from year 2016 to year 2020 (Early Redemption Date) for redeeming the Bonds in that particular financial year. The Bonds will be redeemed on March 25 of the same financial year. Partial buyback of the bonds held under the buyback option shall not be permissible.

Bonds held in dematerialized form The Company or the Registrar upon receipt of the notice from the Bondholders would undertake appropriate corporate action to effect the buyback. The bank details will be obtained from the Depositories for payments. Investors who have applied or who are holding the Bonds in electronic form are advised to immediately update their bank account details as appearing on the records of Depository Participant. Failure to do so could result in delays in credit of the payments to investors at their sole risk and neither the Arrangers nor the Company shall have any responsibility and undertake any liability for such delays on part of the investors

Bonds held in physical form On receipt of the notice from the investor for exercise of buy back option, no action would ordinarily be required on the part of the Bondholder on the Buyback Date and the Buyback Amount would be paid to those Bondholders whose names appear first in the Register of Bondholders. However, the Company may require the Bondholder to duly surrender the Consolidated Bond Certificate to the Company/Registrar for the buyback. While exercising the buyback option, Bondholder are required to furnish any change of address or bank details etc. Upon payment of the Buyback Amounts, the Bonds shall be deemed to have been repaid to the Bondholders and all other rights of the Bondholders shall terminate and no interest shall accrue on such Bonds thereafter. Subject to the provisions of the Companies Act, where the Company has bought back any Bond(s) under the Buyback Facility, the Company shall have and shall be deemed always to have had the right to keep such Bonds alive without extinguishment for the purpose of resale and in exercising such right, the Company shall have and be deemed always to have had the power to resell such Bonds.

15. PAYMENT OF INTEREST/ REDEMPTION/BUYBACK AMOUNT


Payment of Interest Payment of interest on the Bonds will be made to those holders of the Bonds, whose name appears first in the Register of Bondholders maintained by the Depositories and/or the Company and/or the Registrar, as the case may be, as on the Record Date.

Record Date The record date for the payment of interest or the Buyback Amount or the Maturity Amount shall be 3 days prior to the date on which such amount is due and payable ("Record date").

Effect of holidays on payment If the date of payment of interest or principal or any date specified does not fall on a Working Day, then the succeeding Working Day will be considered as the effective date. Interest and principal or other amounts, if any, will be paid on the succeeding Working Day. Payment of interest will be subject to the deduction of tax as per Income Tax Act or any statutory modification or re-enactment thereof for the time being in force. In case the Maturity Date

falls on a holiday, the payment will be made on the next Working Day, without any interest for the period overdue.

Payment on Redemption or Buyback


Bonds held in electronic form On the Maturity Date or the Buyback Date as the case may be, the Maturity Amount or the Buyback Amount as the case may be, will be paid as per the Depositories' records on the Record Date fixed for this purpose. No action is required on the part of Bondholders. The bank details will be obtained from the Depositories for payments. Investors who have applied or who are holding the Bond in electronic form are advised to immediately update their bank account details as appearing on the records of Depository Participant. Failure to do so could result in delays in credit of the payments to investors at their sole risk and neither the Lead Arrangers nor the Company shall have any responsibility and undertake any liability for such delays on part of the investors.

Bonds held in physical form Payments with respect to maturity or buyback of Bonds will be made by way of cheques or pay orders or electronically. The bank details will be obtained from the Registrar for effecting payments. However, if the Company so requires, payments on maturity may be made on surrender of the Consolidated Bond Certificate(s). Dispatch of cheques or pay orders in respect of payments with respect to redemptions will be made on the Maturity Date or Buyback Date within a period of 30 days from the date of receipt of the duly discharged Consolidated Bond Certificate, if required by the Company. The Company's liability to the Bondholders including for payment or otherwise shall stand extinguished from the Maturity Date or upon dispatch of the Maturity Amounts to the Bondholders. Further, the Company will not be liable to pay any interest, income or compensation of any kind from the Maturity Date.

Mode of Payment All payments to be made by the Company to the Bondholders shall be by cheques demand drafts or through National Electronic Clearing System ("NECS")

16. TAXATION
The interest on Bonds will be subject to deduction of tax at source at the rates prevailing from time to time under the provisions of the Income Tax Act or any statutory modification or reenactment thereof. As per the current provisions of the Income Tax Act, on payment to all categories of resident Bondholders, tax will not be deducted at source from interest on Bonds, if such interest does not exceed Rs. 2,500 in a financial year. As per clause (ix) of Section 193 of the Income Tax Act, no income tax is required to be withheld on any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India in accordance with the Securities Contracts Regulation Act, 1956, as amended, and the rules notified there under. Accordingly, no income tax will be deducted at source from the interest on Bonds held in dematerialized form. In case of Bonds held in a physical form no tax may be withheld in case the interest does not exceed Rs. 2,500. However, such interest is taxable income in the hands of resident Bondholders. If interest on Bonds exceeds the prescribed limit of Rs. 2,500 in case of resident individual Bondholders, to ensure non-deduction or lower deduction of tax at source, as the case may be, the Bondholders are required to furnish either (a) a declaration (in duplicate) in the prescribed form i.e. Form 15G which may be given by all Bondholders other than companies, firms and non-residents subject to provisions of section 197A of the Income Tax Act; or (b) a certificate, from the assessing officer of the Bondholder, in the prescribed form under section 197 of the Income Tax Act which may be obtained by the Bondholders. Senior citizens, who are 65 or more years of age at any time during the financial year, can submit a self-declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A even if the aggregate income credited or paid or likely to be credited or paid exceeds the maximum limit for the financial year. These certificates may be submitted to the Company or to such person at such address as may be notified by us from time to time, quoting the name of the sole or first Bondholder, Bondholder number and the distinctive number(s) of the Bond(s) held, at least one month prior to the interest payment date. Tax exemption certificate or document, if any, must be lodged at the office of the Registrar prior to the Record Date or as specifically required. Tax applicable on coupon will be deducted at source on accrual thereof in the Company's books and / or on payment thereof, in accordance with the provisions of the Income Tax Act and / or any other statutory modification, re-enactment or notification as the case may be. A tax deduction certificate will be issued for the amount of tax so deducted on annual basis.

17. RIGHTS OF BONDHOLDERS


The Bonds shall not confer upon the holders thereof any rights or privileges including the right to receive notices or annual reports of, or to attend and/or vote, at a General Meeting of PFS. If any proposal affecting the rights attached to the Bonds is considered by PFS, the said proposal will first be placed before the registered Bondholders or Trustees for their consideration. The Bonds comprising the present Private Placement shall rank pari passu inter se without any preference to or priority of one over the other or others over them and shall also be subject to the other terms and conditions to be incorporated in the Agreement / Trust Deed(s) to be entered into by PFS with the Trustees and the Letters of Allotment/Bond Certificates that will be issued. A register of Bondholders will be maintained and sums becoming due and payable in respect of the Bonds will be paid to the Registered Holder thereof. The Bonds are subject to the provisions of the Act and the terms of this Information Memorandum. Over and above such terms and conditions, the Bonds shall also be subject to other terms and conditions as may be incorporated in the Agreement/Bond Trust Deed/Letters of Allotments/Bond Certificates, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by the Government of India and/or other authorities and other documents that may be executed in respect of the Bonds.

18. MODIFICATION OF RIGHTS


The rights, privileges and conditions attached to the Bonds may be varied, modified and / or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction of the Trustees, provided that nothing in such consent or sanction shall be operative against PFS, where such consent or sanction modifies or varies the terms and conditions governing the Bonds, if the same are not acceptable to PFS.

19. NOTICES
The communications to the Bondholder(s) required to be sent by PFS or the Trustees shall be deemed to have been given if sent by an ordinary post to the registered holder of the Bonds. All communications to be given by the Bondholder(s) shall be sent by registered post or by hand delivery to the Registrar and Transfer Agents or to PFS or to such person, at such addresses as may be notified by PFS from time to time.

20. MISCELLANEOUS
Loan against Bonds The Bonds cannot be pledged or hypothecated for obtaining loans from scheduled commercial banks during the Lock-in Period of five years.

Lien The Company shall have the right of set-off and lien, present as well as future on the moneys due and payable to the Bondholder, whether in single name or joint name, to the extent of all outstanding dues by the Bondholder to the Company.

Lien on Pledge of Bonds The Company, at its discretion, may note a lien on pledge of Bonds if such pledge of Bond is accepted by any bank or institution for any loan provided to the Bondholder against pledge of such Bonds as part of the funding after completion of lock-in period of five years as notified time to time.

Right to Reissue Bond(s) Subject to the provisions of the Act, where the Company has redeemed or repurchased any Bond(s), the Company shall have and shall be deemed always To have had the right to keep such Bonds alive without extinguishment for the purpose right, the Company shall have and be deemed always to have had the power to resell or reissue such Bonds either by reselling or reissuing the same Bonds or by issuing other Bonds in their place. This includes the right to reissue original Bonds.

Joint-holders Where two or more persons are holders of any Bond (s), they shall be deemed to hold the same as joint holders with benefits of survivorship subject to Articles and applicable law.

Sharing of Information The Company may, at its option, use its own, as well as exchange, share or part with any financial or other information about the Bondholders available with the Company, its subsidiaries and affiliates and other banks, financial institutions, credit bureaus, agencies,

statutory bodies, as may be required and neither the Company nor its subsidiaries and affiliates nor their agents shall be liable for use of the aforesaid information.

Issue of Duplicate Consolidated Bond Certificate(s) If any Consolidated Bond Certificate is mutilated or defaced it may be replaced by the Company against the surrender of such Consolidated Bond Certificates, provided that where the Consolidated Bond Certificates are mutilated or defaced, they will be replaced only if the certificate numbers and the distinctive numbers are legible. If any Consolidated Bond Certificate is destroyed, stolen or lost then upon production of proof thereof to the RTA/Companys satisfaction and upon furnishing such indemnity/security and/or documents as we may deem adequate, duplicate Consolidated Bond Certificate(s) shall be issued.

Jurisdiction The courts of New Delhi shall have jurisdiction to settle any disputes which may arise out of or in connection with the Bond Trust Deed or the Bonds and that accordingly any suit, action or proceedings (together referred to as "Proceedings") arising out of or in connection with the Bond Trust Deed and the Bonds may be brought in the courts of New Delhi.

Brief Profile of Directors of the Company


Name of Director Mr. Tantra Narayan Thakur Designation Chairman & Managing Director Dr. Ashok Haldia Whole-Time Director and Chief Financial Officer Mr. Sudhir Kumar Independent Director Mr. M K Goel Non-executive Director Mr. Prathipati Abraham Independent Director Mrs. Rama Murali Independent Director Dr. Uddesh Kohli Independent Director Mr. Ramarao Muralidharan Coimbatore Mr. Neil Kant Arora Independent Director Non-Executive Director Mr. Surinder Singh Kohli Independent Director

Mr. Tantra Narayan Thakur, aged 61 years, is the Chairman and Managing Director
of our Company. He is the founder of our Company and has been on the Board since our incorporation. He holds a Bachelors degree in Science in engineering. Mr. Thakur has more than 30 years of experience as a member of the Indian Audit and Accounts Service. Mr. Thakur has also served as a Director (Finance and Financial Operations), Power Finance

Corporation Limited, where he was responsible for mobilizing resources for the company for on-lending to power projects in addition to accounting and compliance related matters. Currently he is also the chairman and managing director of our Promoter namely PTC India Limited.

Dr. Ashok Haldia aged 54 years, is a Whole Time Director and Chief Financial Officer of
our Company. He is a member of the Institute of Chartered Accountants of India, Institute of Company Secretaries of India and the Institute of Cost and Works Accountants of India. He holds a Ph.D. degree in Privatization of Public Enterprises in India from University of Rajasthan. He has been on the Board of the Company since August 13, 2008, prior to which he served as a Secretary, Institute of Chartered Accountants of India, New Delhi for about a decade. Dr. Haldia has been associated with the Bureau of Enterprises, State Enterprises Department, Government of Rajasthan and Power Finance Corporation Limited

Mr. Sudhir Kumar, aged 54 years, is an Independent Director of our Company and has
been on the Board of our Company since March 22, 2010. He holds a Masters degree in Commerce from the Delhi School of Economics, University of Delhi. He is an Indian Administrative Services officer presently serving as Joint Secretary in Ministry of Power, Government of India. He has also served as the officer on special duty to Minister for Railways, Government of India. Presently, he is also on the board of our Promoter, PTC India Limited.

Mr. M.K. Goel aged 53, is a Non Executive Director of our Company and has been on the
Board of our Company since January 12, 2010. He holds a Bachelors degree in technology specializing in electrical engineering from Kanpur University. Currently he is associated with Power Finance Corporation Limited (PFC) as director (commercial) besides heading the human resources, administration, institutional appraisal and legal functions. Prior to joining PFC, Mr. Goel was working with NHPC Limited for about a decade. Presently, he is also on the board of our Promoter, PTC India Limited.

Mr. P Abraham aged 71 years, is an Independent Director of our Company and has been
on the Board of our Company since June 4, 2007. He holds a Masters degree in Arts from Andhra University, Visakhapatnam. Mr Abraham has served as the Secretary to the Ministry

of Power, Government of India and is presently serving as the chairman of Maharashtra State Electricity Board. Presently, he is also on the board of our Promoter, PTC India Limited

Mrs. Rama Murali aged 62 years, is an Independent Director of our Company and has
been on the Board of our Company since April 21, 2009. She holds a Bachelors of Arts (Hons) degree from Maharani College, Jaipur, and University of Rajasthan. She is a retired Indian Audit and Accounts Service officer. Mrs. Murali has served as the Joint Secretary, Department of Economic Affairs, Ministry of Finance. She has also served as the financial advisor in the Department of Scientific and Industrial Research, the Council of Scientific and Industrial Research, Government of India, and the New Delhi Municipal Committee where she was also the overall in-charge of finance and accounts. She is also a life member of the Indian Institute of Public Auditors.

Dr. Uddesh Kohli aged 69 years, is an Independent Director of our Company and has
been on the Board of our Company since September 25, 2009. He holds a Bachelors degree (Hons) in Engineering from the Indian Institute of Technology, Roorkee. He also holds a Ph.D. degree in Economics from the Kohli is the chairman of Engineering Council of India and Construction Industry Arbitration Association. He was the chairman and managing director of Power Finance Corporation Limited and former adviser, Planning Commission (Government of India) and has also been associated with international bodies such as Asian Development Bank, United Nations Industrial Development Organization, United Nations Development Programme and United Nations Office for Project Services.

Mr. C. R. Muralidharan aged 63 years, is an Independent Director of our Company and


has been on the Board of our Company since January 11, 2010. He holds a Bachelors of Science degree from Madras University and is a certified associate of Indian Institute of Bankers. Mr. Muralidharan has served as a whole-time member (finance and accounts) of Insurance Regulatory and Development Authority (IRDA). Prior to joining IRDA, he served in the Reserve Bank of India (RBI) for more than three decades in various capacities and was also heading the Department of Banking Policy and Regulation, RBI between 1998 to 2005 as the chief general manager. He has also been a member of the International Monetary Fund missions on financial sector assessment project of Uganda in 2001 and the assessment of the regime for insolvency of banks in Kuwait in 2004.

Mr. Neil Kant Arora aged 41 years, is a Non Executive Director of our Company and has been on the Board of our Company since January 31, 2008. He holds a first class honours

degree in Actuarial Science from the Mr. Arora is serving as an executive director with Macquarie Capital Group (Macquarie), Dubai and heads the Middle Eastern advisory team. Prior to this, he was based out of the Singapore office of Macquarie and heading the Asian infrastructure team. Mr. Neil Kant Arora is a resident of the United Arab Emirates

Mr. Surinder Singh Kohli aged 65 years, in an Independent Director of our Company
and has been on the Board of our Company since December 13, 2010. He holds Bachelors degree in Science (Mechanical Engineering) from Banaras Hindu University and a diploma in Industrial Finance from Indian Institute of Bankers. Prior to joining our Company he was the chairman and managing director of India Infrastructure Finance Company Limited, Punjab National Bank, Small Industries Development Bank of India and Punjab and Sind Bank respectively. He was also the chairman of the India Banks Association for two terms.

COMPANY PROFILE
PTC India Financial Services Limited (PFS) is an Indian non-banking financial institution promoted by PTC India Limited (PTC") to make principal investments in, and provide financing solutions for companies with projects across the energy value chain, which interalia includes investing in equity and/or extending debt to power projects in generation, transmission, distribution; fuel sources, fuel related infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers and EPC contractors etc. PFS is regulated by the Reserve Bank of India (RBI) as a systemically important non-deposit taking, non-banking financial company ("NBFC"), and have recently been classified by the RBI as an Infrastructure Finance Company, or IFC. PFS also believes that it is one of few NBFCs that have been granted this status. The IFC status enhances PFSs ability to raise funds on a costcompetitive basis and enables Company to assume higher debt exposure in infrastructure projects. PFS is a one stop solution provider offering a comprehensive range of financial products and services that add value throughout the life cycle of projects across all areas of the energy value chain. PFS believes this has enabled it to establish itself as a preferred financing provider for power projects. PFS believes its power sector knowledge and experience enables it to identify investment opportunities with high potential and effectively manage risks associated with such opportunities. PFS also believes its exclusive focus on the power sector has enabled it to develop strong relationships and become a preferred financing provider for power projects, particularly for smaller and medium sized projects, compared to competitors that are not similarly focused on the power sector. The investment decision by PFS into the equity and/or debt is based on many factors such as the valuation offered by the power projects, commitment shown by the developers and overall techno-economic viability. The investment made by PFS adds to the valuation of the project (investee company) by bringing the core competency of its promoter i.e. PTC in off-take and marketing of power, side by side the brand value of Goldman Sachs and Macquarie, which assists in tying up the balance funding requirements for the project.

PTC INDIA LIMITED (PROMOTER)


PTC India Limited (PTC) was established in 1999 through an initiative of the Government of India, in consonance with the Mega Power Policy, to establish a power market in India as well as to act as a credit mitigating agency for Mega Power Projects by buying electricity from them through long term Power Purchase Agreements (PPAs) and sell the same through backto-back Power Sale Agreements (PSAs) to various state utilities. In the meantime, PTC started the concept of short term trade of electricity in a perennially electricity starved country. In addition to the development of the short term market, PTC through facilitation of power projects being set up by Independent Power Producers (IPPs) with whom it enters into long term PPAs and sells the electricity being generated in the plant to various utilities through long term back-to-back PSAs. PTCs total portfolio size has grown to more than 14,185 MW of PPAs (including cross border) and more than 11,781 MWs of MOUs for power purchase with various IPPs across the country. Additionally, PTC has started various ancillary services in the form of Advisory as well as fuel intermediation to support the growth of such power projects in the country.

OTHER SHAREHOLDERS G S Strategic Investments Limited


G S Strategic Investments Limited, a company incorporated with limited liability under the laws of Mauritius is a 100% subsidiary of Goldman Sachs. Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services to a substantial and large client base that includes corporations, financial institutions, governments and high-net-worth individuals;.

Macquarie India Holdings Limited


Macquarie India Holdings Limited is a part of the Macquarie Group. Macquarie Group is a provider of specialist investment, advisory and financial services.

SHAREHOLDING PATTERN
Particulars No. of Equity Shares 1 PTC India Ltd 2 GS Strategic Investments Ltd 3 Macquarie India Holdings Limited TOTAL 434,583,335 100.00% 48,666,667 11.20% 48,666,667 11.20% 337,250,001 Shareho lding (%) 77.60%

PRODUCT & SERVICES 1. Equity


PFS do strategic equity investments in companies in the energy value chain in India, including in Greenfield and Brownfield projects. The nature and extent of our equity participation in such companies vary in accordance with the requirements, opportunities and risks associated with the relevant project, but we typically do not retain management control. Our investment horizon tends to focus on the short to medium term. As of September 30, 2010, our Board had approved equity commitments for ten companies for an aggregate amount of Rs.4,838.46 million, with projects aggregating 2,621 MW of power generation capacity.

2. Lending
PFS offers debt assistance to projects subject to exposure limits stated earlier. PFS structure the debt assistance taking into consideration factors like needs of the borrowing entity, the market conditions, regulatory requirements, risks and rewards from the projects. PFS offers the following debt instruments: Term Loans Bridge Loans Short Term Loans PFS also considers mezzanine funding debt against promoters contribution in equity or in any other form depending upon the requirements of the project. PFS provides debt assistance to projects in the entire energy value chain i.e. power projects, fuel sources, related infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers like transformers, conductors, insulators, cables etc; which are technically and economically viable PFS extends finance assistance to all kinds of borrowing entities as well as private sector in the entire energy value chain. However, the priority of PFS would be private sector, followed by Joint sector/ Government sector projects. The interest rate to be charged by PFS shall take into account the cost of funds of PFS, rates being charged by other institutions/bank, and condition of the financial market While providing for a reasonable margin, PFS may provide for charging differential interest rate form the borrowers depending

upon the type of project, and grading based on the entity appraisal. As of September 2010, our Board had approved debt sanctions (including long term and short term/mezzanine funding) for 27 companies for an aggregate amount of approx Rs 18,815 million, with projects aggregating 8,853 MW of power generation capacity.

3. Fee Based Services


With a core team of in-house power sector professionals, PFS strives to help its clients to become more competitive, effective and successful. PFS has already started its loan syndication activities in current Financial year.

INVESTMENTS IN ENERGY VALUE CHAIN (as on September 30, 2010)


Indian Energy Exchange, in which PFS as promoter, had subscribed for a 26% equity stake for Rs. 69.39 million. It is Indias first exchange to facilitate the trading of power. The exchange was commissioned on June 27, 2008 and has a market share of approx 84% of the electricity traded on any power exchange. In September 2010, we liquidated a portion of shareholding in IEX for a consideration of Rs. 135.3 million after which our shareholding comes to 21.12%. Varam Bio energy Private Limited, in which PFS subscribed for a 26% equity stake for Rs.43.90 million, has developed a 10 MW biomass project, based primarily on rice husk, in Bhandara, Maharashtra, that was commissioned in February 2009. RS India Wind Energy Private Limited, in which PFS subscribed for a 37% equity stake for Rs.611.21million under a subscription agreement, is setting up a 99.45 MW wind based power project in Satara, Maharashtra of which 39.60 MW is commissioned and in process of setting up a 3 MW solar power project in Haryana. Meenakshi Energy Private Limited is setting up a 900 MW imported coal based tolling power project in Nellore, Andhra Pradesh. The project has been bifurcated into phase I of 300 MW (2 x 150 MW) and phase II of 600 MW. PFS has subscribed for a 26% equity stake for Rs. 996.80 million for phase I and has disbursed Rs. 603.41 million in the company. Project is under advance stage of development and expected to commission by December 2011. PTC Bermaco Green Energy Systems Limited, in which PFS has subscribed for a 26% equity stake for Rs. 13.75 million, is a joint venture arrangement between Bermaco Energy Systems Limited. Under the joint venture agreement it will set up a series of biomass projects across India. East Coast Energy Private Limited is developing a 1320 MW thermal power project, comprising of two units of 660 MW each, in Andhra Pradesh. The project is expected to be commissioned by May 2014. The estimated cost of the project is Rs.65,700 million and financial closure for the project has been achieved. East Coast has entered into a PPA with PTC partly on long-term and partly on a short-term basis. PFS has committed an equity

investment of Rs. 1333.85 million and as on 30 Sep 2010, we have invested Rs. 1250 million in project. Ind Barath Powergencom Limited, in which PFS has subscribed for a 26% equity stake for Rs.556.30 million, under a share subscription agreement, is developing three units of each 63 MW, totaling to 189 MW coal fired power project, in Thoothukkudi District, Tamilnadu. Two of the units of the project have already been synchronized with the grid.

Ind Barath Energy (Utkal) Ltd, in which PFS has subscribed for a 13% equity stake for Rs.1050 million, under a share subscription agreement, is developing a 700 MW thermal power project in Orissa. Financial closure has been achieved for the project. The project is due for commissioning in March 2012.

INDUSTRY OUTLOOK

Overview of the Indian Economy


India is the fifth largest economy in the world after the European Union, United States of America, China and Japan in purchasing power parity terms with an estimated GDP (purchasing power parity) of US$3.68 trillion in 2009. India is also among the fastest growing economies globally and has grown at an average rate of more than 7.0% since 1997. An industrial slowdown early in 2008, followed by the global financial crisis, led annual GDP growth to slow to 6.5% in 2009, still the second highest growth in the world among major economies (Source: CIA World Fact book website). India escaped the brunt of the global financial crisis because of cautious banking policies and a relatively low dependence on exports for growth. According to the revised estimates of the Central Statistical Organisation (CSO) Indias GDP grew at a rate of 7.4% in the fiscal year 2010. The following table presents a comparison of Indias real GDP growth rate with the real GDP growth rate of certain other countries:

Countries Australia Brazil China Germany India Japan South Korea Malaysia Russia Thailand United Kingdom United States

2007 4.8% 6.1% 13.0% 2.5% 9.0% 2.3% 5.1% 6.5% 8.1% 4.9% 2.7% 1.9%

2008 2.3% 5.1% 9.0% 1.3% 7.4% (1.2%) 2.3% 4.7% 5.6% 2.5% (0.1%) 0.0%

2009 1.3% -0.2% 9.1% (4.9%) 7.4% (5.3%) 0.2% (1.7%) (7.9%) (2.2%) (4.9%) (2.6%)

Investment in India has, remained relatively stable despite the global slowdown and has been growing at a rate higher than that of GDP. There has been upward trend in the growth of the private investment. The recovery was broad based with mining and quarrying, manufacturing, and electricity, gas and water supply recording impressive growth rates. (Source: Ministry of Finance: Economic Survey, 2009-10) Indias ability to recover from the global slowdown and its own domestic liquidity crunch has been driven by the countrys large domestic savings (including corporate retained earnings) and private consumption. Further, the GoIs fiscal policies and the monetary policies of the Reserve Bank of India have also played an important role in the revival of economic growth. In particular, the GoI as part of its fiscal stimulus package took the following initiatives to promote consumption in the economy: (i) increased GoI expenditure especially on infrastructure; and (ii) reduced taxes to spur consumption.

The RBI has also taken various other steps to stimulate the economy including by (a) reducing the cash reserve ratio (CRR) to 6.00%; (b) maintaining the statutory liquidity ratio (SLR) at 25.00%; (c) reducing the repo rate to 6.25%; and (d) reducing the reverse repo rate to 5.35%. (Source: RBI) A strong recovery in the industrial sector combined with a resilient services sector muted the impact of a deficient South-West monsoon on overall output. The contribution of the industrial sector to the overall growth increased sharply from 9.5% in 2008-2009 to 28.0% in 2009-2010. (Source: RBI, 2009-2010 Annual Report).

Relative Contribution to GDP Growth

12 10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 Services Agriculture & allied activities Industry

Sctoral Gross Domestic Product Growth

14 12 10 8 6 4 2 0 2005-06 2006-07 2007-08 2008-09 2009-10 Agriculture & allied activities Industry Services

The Indian economy witnessed robust recovery in growth in the last quarter of fiscal 2010. Most of the business expectation surveys suggest continuation of the growth momentum in fiscal 2011. The Industrial Outlook Survey of the Reserve Bank indicates further improvement in several parameters of the business environment for the three months ended September 30, 2010 quarter. The Professional Forecasters Survey conducted by the Reserve Bank in June 2010 places overall (median) GDP growth rate for fiscal 2011 at 8.4%, higher than 8.2% reported in the previous round of the survey. (Source: Macroeconomic and Monetary Developments: First Quarter Review Fiscal 2011).

Organization of the Power Industry in India


The following diagram depicts the current structure of the Indian power industry: Generation SEBs Transmission SEBs/STUs SEBs/EDs Discoms Pvt Licenses
Agriculture Domestic commercial industry other

Distribution

Distribution

CPUs

Power grid

IPPs & Private Licensees

Private Utilities

Energy available and sold

Captive

Transformation Transmission Distribution Losses including unaccounted Energy

Captive Consumer

Open

Power Trading Companies

Overview of Indian Power Industry


India has continuously experienced shortages in energy and peak power requirements. According to the Monthly Review of the Power Section ("Monthly Review") published by the CEA in October 2010, the total energy deficit and peak power deficit during April 2010 to October 2010 was approximately 9.2% and 10.1%, respectively.

The shortages in energy and peak power have been primarily due to the sluggish progress in capacity addition. During the 10th Five Year Plan (fiscal 2002 to fiscal 2007), capacity addition achieved compared to target capacity addition was 51.5%. During the 11th Five Year Plan (fiscal 2008 to fiscal 2012), capacity addition achieved was 9,263 MW or 56.7% of target capacity addition of 16,335 MW in fiscal 2008, while in fiscal 2009, capacity addition achieved was 3,454 MW, or 31.2% of target capacity addition of 11,061 MW, while in fiscal 2010, capacity addition achieved was 9,585 MW, or 66.1% of target capacity addition of 14,507 MW. According to the Monthly Review (October 2010), the total installed power generation capacity in India was 167278.36 MW as of August 31, 2010.

Power Consumption
The per capita consumption of power in India has grown from 566.7 kWh/year in fiscal 2003 to 733.5 kWh/year in fiscal 2009, at a CAGR of 4.39% (Source: Monthly Review (July 2010)). The following table sets forth information relating to India's per capital consumption of power for the periods indicated: Year Per Capita Consumption (kWh) 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 566.7 592.0 612.5 613.5 671.9 717.1 733.5

The total energy consumption in India is estimated to grow from 566 Mtoe in 2006 to 1280 Mtoe in 2030. (Source: World Economic Outlook 2008, IEA). This implies growth at a CAGR of 3.5% CAGR in India's energy requirement over the next 25-30 years and hence, there is a huge potential for investments in the energy sector in India.

18000 16000 14000 12000 10000

8000
6000 4000 2000 0

Electricity Consumption Capital(kwH)

The GoI has set a goal of 1,000 kWh per capita by fiscal 2012 in its mission of Power for All by 2012 under the National Electricity Policy.

According to the CIA Fact book, India is sixth largest consumer of electricity in the world after the United States, China, European Union, Russia and Japan with an estimated 568 billion kWh in total electricity generated plus imports and minus exports in 2007.

Power Demand-Supply Overview


The Indian power sector has historically been beset by energy shortages which have been rising over the years. In fiscal 2010, peak energy deficit was 12.7% and total energy deficit was 10.1%. The following table provides the peak and normative shortages of power in India from fiscal year 2003 to June 2010:

The deficits in electric energy and peak power requirements vary across different regions in India. The peak deficit was 17.2% in the Western Region, followed by 18.5% in the North Eastern Region in the period from April to October 2010. The deficit is a result of the slow development progress of additional power generation capacity in those areas. The following table outlines the peak and normative power shortages in India in fiscal year 2010 across the regions of India:

Demand Projections
According to the Integrated Energy Policy (IEP) report dated August 2006 issued by the Planning Commission, India would require additional capacity of about 220-233 gigawatt (GW) by 2012, 306-337 GW by 2017 and 425-488 GW by 2022, respectively, based on normative parameters in order to maintain a 8-9% GDP growth rate (Source: GoI, "Integrated Energy Policy, Report of the Expert Committee", August 2006, available at http://planningcommission.gov.in/reports/genrep/rep_intengy.pdf).

The table below lays out the additional capacity needed by 2012, 2017 and 2022 under different GDP growth rate scenarios:

Assume d GDP Growth (%) By fiscal 2012 By fiscal 2017 By fiscal 8.0 9.0 8.0 9.0 8.0

Electricity Generation required (BU)

Peak Demand (GW)

Installed Capacity (GW)

Capacity Addition Required (GW)*

1,097 1,167 1,524 1,687 2,118

158 168 226 250 323

220 233 306 337 425

71 84 157 188 276

Power Generation

Historical Capacity Additions The energy deficit in India is a result of insufficient progress in the development of additional energy capacity. The Indian economy is based on planning through successive five year plans (Five-Year Plans) that set out targets for economic development in various sectors, including the power sector. In the last three Five-Year Plans (the Eighth, Ninth, and Tenth Five-Year Plans, covering fiscal years 1992 to 2007), less than 55% of the targeted additional energy capacity level was added. According to the White Paper on Strategy for Eleventh Plan, prepared by CEA and Confederation of Indian Industry, August 2007 (the White Paper)),India added an average of approximately 20,000 MW to its energy capacity in each of the 9th and 10th Five-Year Plan periods (fiscal years 1997 to 2002 and 2002 to 2007).

The following table sets forth the targeted energy capacity addition, the installed capacity actually achieved at the end of those fiscal year and the installed capacity actually achieved as a percentage of the targeted capacity additions for each of those fiscal years:

Five-Year Plan/Year 10th Plan FY 2008 FY 2009 FY 2010 October 2010

Target (MW) 39,285.72 16,335 11,061 14,507 21,441.2

Achievement (MW) 21,094.6 9,263 3,454, 9,585 7,020.0

Achievement (% of MW) 53.7% 56.7% 31.2% 66.1% 32.7%

The total capacity addition during the past 25 years between the 6th and the 10th Five-Year Plans was approximately 91,000 MW. A total capacity addition of 78,700 MW is planned for the 11th Five-Year Plan which should result in significant investments in the power generation sector.

Installed Generation Capacity


The following table sets forth a summary of India's energy generation capacity as of October 31, 2010 in terms of fuel source and ownership:

Sector Central State Private

Thermal

Nuclear

Hydro 8,685.40 27,218.00 1,425.00

RES* 0.00 2,822.32 13,964.66

Total 51,867.63 82,227.05 33,183.68

38,622.23 4,560.00 52,186.73 0.00 17,794.02 0.00

The private sector has historically been hesitant to enter into the market for power plants because of onerous governmental regulations on the construction and operation of power plants and sourcing of Fuel for such plants. The participation of the private sector has, however, been increasing over time, Thanks to some key power sector reforms.

Future Capacity Additions


The proposed capacity addition during the 11th Five-Year Plan is 78,700.4 MW according to Monthly Review (October 2010), published by CEA.

Thermal Central State Private TOTAL 24,840 23,301 11,552 59,693

Nuclear 3,380 0.00 \0.00 3,380

Hydro 8,654 3,482 3,491 15,627

Total 36,874 26,783 15,043 78,700

This represents a growth in capacity of 9.8% per annum during the 11th Plan period. According to the White Paper, the total fund requirement has been assessed to ` 10.32 trillion.

Planned Expansion
The aim for the 11th Plan i.e. by 2012 is a capacity addition of 15,000 MW from renewable. By the end of the 11th Plan, renewable power capacity could be 25,000 MW in a total capacity of 2, 00,000 MW accounting for 12.5% and contributing around 5% to the electricity mix. A capacity addition of around 30,000MW is envisaged for the 12th and 13th Plans. Renewable power capacity by the end of the 13th plan period i.e. by 2022 is likely to reach 54,000 MW, comprising 40,000 MW wind power, 6,500 MW small hydro power and 7,500 MW bio-power, which would correspond to a share of 5% in the then electricity-mix. (Source: 11th Five Year Plan MNRE)

Investments in generation
The total fund requirement for generation projects, during the Twelfth Plan period is estimated at approximately ` 4,950,830 million, with approximately ` 1,266,490 million being required for the hydro sector, approximately ` 3,306,680 million is being required for the thermal sector and approximately ` 377,660 million is being required for the nuclear sector. (Source: Base Paper, International Conclave on Key Inputs for Accelerated Development of Indian Power Sector for Twelfth Plan and Beyond, 18-19 August 2009, Mop and CEA)

Capacity Utilisation
Capacity utilization in the Indian power sector is measured by the plant load factor (PLF) of generating plants.

Coal
The average PLF for coal-fired plants in India has increased from 69.0% in the fiscal year 2001 to 76.65% in the fiscal year 2010. The following table sets forth the average PLF for coal-fired plants in India: PLF varies significantly across ownership segments. According to the Mop, 2008-2010 Annual Report, coal-fired generating plants owned by the state electricity boards (SEBs) operated at an average PLF of around 69.72% as of January 31, 2010, while those owned by private companies operated at an average PLF of 84.43%. The average PLF of central public sector undertakings (CPSUs) was 84.13% during the same period.

Renewable Power
Power from renewable energy sources such as wind, biomass, small hydro and solar energy is being generated for meeting the electricity requirements in different locations across the country. 15,691 MW grid power from renewable sources of power has been installed up to December 31, 2009. In addition, renewable energy sources are being utilised for off-grid power generation to meet electricity requirements at decentralised locations. Renewable power projects based on wind power, biomass, and small hydro and solar are mainly private investment driven with favorable tariff policy regimes established by State Electricity Regulatory Commissions (SERC), and almost all-renewable power capacity addition during the year has come through this route. (Source: Annual Report 2009-10 MNRE)

Wind Power
Wind energy, today, has emerged as the most promising renewable energy technology for generating grid connected power amongst various renewable energy sources. A total capacity of 10,925 MW has been established up to December, 2009 in the country. India is now the fifth largest wind power producer in the world, after USA, Germany, Spain and China. The on shore wind power potential has been estimated at about 48,500 MW, assuming 1% land availability in potential areas for setting up wind farms @12 ha/MW in sites having wind power density greater than 200 W/sq.m at 50 m height. (Source: Annual Report 2009-10 MNRE)

Biomass
The current potential for power generation from surplus agro and forestry residues is estimated at 16,000 MW. With progressive higher steam parameters and efficient project configuration in new sugar mills and modernization of existing ones, the potential of surplus power generation through bagasse cogeneration in sugar mills is estimated at 5000 MW. Thus the total estimated biomass power potential is approximately 21,000 MW. Between April and December 2009, biomass power and bagasse cogeneration capacity addition of 384 MW (125 MW biomass projects and 259 MW bagasse cogeneration) has been achieved in the States of Andhra Pradesh, Chhattisgarh, Karnataka, Maharashtra, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal against a target of 400 MW. Current trends indicate that it is likely that a total capacity of 450 MW would be added during fiscal 2009. The cumulative biomass power

and cogeneration based power capacity has reached approximately 2,136 MW which comprises of 829 MW of biomass power projects and 1307 MW of bagasse cogeneration projects. (Source: Annual Report 2009-10 MNRE)

Power Transmission and Distribution


In India, the transmission and distribution system is a three-tier structure comprised of regional grids, state grids and distribution networks. The five regional grids, configured on a geographical contiguity basis, enable transfer of power from a power surplus state to a power deficit state. The regional grids also facilitate the optimal scheduling of maintenance outages and better co-ordination between power plants. These regional grids are to be gradually integrated to form a national grid, whereby surplus power from a region could be redirected to another region facing power deficits, thereby allowing a more optimal utilization of the national generating capacity. Most inter-regional and interstate transmission links are owned and operated by Power Grid though some are jointly owned by the State Electricity Boards (SEBs). Power Grid is the central transmission utility of India and holds one of the largest transmission networks in the world. Power Grid has a pan-India network presence of approximately 79,556 circuit kms of transmission network (as of December 1, 2010), 132 substations (as of September 30, 2010), and a total transformation capacity of 89,170 mega volt ampere (as of December 1, 2010). As of December 1, 2010, approximately 51% of the entire generating capacity in India is sent through Power Grid's system. (Source: http:powermin.nic.in and http:powergridindia.com). Power Grid is pursuing the establishment of an integrated national power grid, in a phased approach, in order to fortify the regional grids and to support the generation capacity addition program of about 78,577 MW during the Eleventh Five-Year Plan period. The existing inter-regional power transfer capacity of 17,000 MW is expected to be boosted to 37,000 MW by 2012 through the use of Transmission Super Highways. (Source: http:powergridindia.com) According to the White Paper, the total fund requirement has been assessed to ` 10.32 trillion. State grids and distribution networks are mostly owned and operated by the respective SEBs or state governments (through state electricity departments). A direct consequence of the high AT&C losses is the inadequate financial condition of SEBs, thereby holding back the SEBs from making any meaningful investments in generation and in modernizing the transmission and distribution network.

Investments in generation, transmission and distribution


The total fund requirement for transmission system development and related schemes during the Twelfth Plan period is estimated at ` 2,400,000 million, with ` 1,400,000 million being required for the central sector and ` 1,000,000 million is being required for the state sector. (Source: Base Paper, International Conclave on Key Inputs for Accelerated Development of Indian Power Sector for Twelfth Plan and Beyond, 18-19 August 2009, Mop and CEA) The total fund requirement for the distribution sector, during the Twelfth Plan period is estimated at ` 3,710,000 million. (Source: Base Paper, International Conclave on Key Inputs for Accelerated Development of Indian Power Sector for Twelfth Plan and Beyond, 18-19 August 2009, Mop and CEA).

Power Trading
Historically the main suppliers and consumers of bulk power in India have been the various government controlled generation and distribution companies who usually contracted power on a long-term basis through power purchase agreements (PPAs) with regulated tariffs. However, in order to encourage the entry of merchant power plants and private sector investment in the power sector, the Electricity Act recognized power trading as a separate activity from generation and has facilitated the development of a trading market for electricity in India by allowing for open access to transmission networks for normative charges. Power trading involves the exchange of power from suppliers with surplus to those with deficit. Seasonal diversity in generation and demand, as well as the concentration of power generation facilities in the resources rich eastern region of India, have created significant opportunities for the trading of power. Recent regulatory developments include the announcement of rules and provisions for open access and licensing related to interstate trading in electricity. Several entities have started trading operations or made application for trading licenses. With the help of the reforms, the volume of power traded as well as its traded price has increased rapidly over the last few years.

Tariffs
The main objectives of the National Tariff Policy (NTP) notified by the GOI on January 6, 2006, include promoting competition, efficiency in operations and improvements in the quality of power supply and ensuring the accessibility of electricity to consumers at reasonable and market-competitive rates. The NTP reiterates the importance of implementing competition in different segments of the electricity industry as highlighted in the Electricity Act and that competition will lead to significant benefits to consumers through reduction in capital costs and improved efficiency of operations. It will also facilitate the shaping of price through competition. The NTP stipulates that all future power requirements should be procured competitively by distribution licensees except in cases of expansion of pre-existing projects or where there is a state controlled or state-owned developer involved, in which case, regulators must resort to tariffs set by reference to standards of the CERC, provided that expansion of generating capacity by private developers for this purpose will be restricted to a one time addition of not more than 50% of the existing capacity. Under the NTP, even for public sector projects, tariffs for all new generation and transmission projects will be decided on the basis of competitive bidding after a certain time period.

Merchant Power Plants


Merchant power plants (MPPs) generate electricity for sale at market-driven rates in the open wholesale market. Typically, the MPPs do not have long-term PPAs and are constructed and owned by private developers. Merchant sales, however, include the sale of power under short-term PPAs and on-spot basis. Many private sector newcomers are starting to adopt the MPP model for their projects to generate higher returns as opposed to selling power through a long term PPA, as the off-take risk is seen to be low in light of significant power shortages in the country. The MPPs can sell power to the power trading companies (like the PTC India Ltd and Tata Power Trading Company), the SEBs and industrial and bulk customers.

Captive Power Generation


Another segment of power generation in India is the captive power segment. Captive power refers to power generation from a project established for industrial consumption. According to Monthly Review of Power Sector, August 2010 (CEA), captive power capacity, at 19,509 MW, accounted for 11.86% of the 164,508.80 MW of total installed capacity in India. The

dependence on captive power has been rising, due to the continuing shortage of power and India's sustained economic growth. The Electricity Act 2003 provided further incentives to captive power generation companies to grow by making them exempt from licensing requirements. This has resulted in an increase in captive power capacity. Reliability of power supply and better economics are other variables pushing industries to develop captive generation plants.

Indian Energy Exchange


Indian Energy Exchange (IEX) is India's first nation-wide automated and online electricity trading platform. IEX seeks to catalyze the modernization of electricity trade in India by allowing trading through a technology-enabled platform. On June 9, 2008, IEX received Central Electricity Regulatory Commission approval to begin operations. IEX is a demutualised exchange that will enable efficient price discovery and price risk management in the power trading market. IEX offers a broader choice to generators and distribution licensees for sale and purchase of power facilitating trade in smaller quantities. IEX enables participants to precisely adjust their portfolio as a function of consumption or generation. The total volume of power traded on IEX amounted to 1,089.46 million units in October, 2010 (Source: http://www.cercind.gov.in/2010/MMC/MMC_Monthly_Report_Oct_2010.pdf).

Power Exchange India Limited


Power Exchange India Limited (PXIL) is a fully electronic, nation-wide exchange for trading of electricity. It has been promoted by two of India's leading Exchanges, National Stock Exchange of India Ltd (NSE) & National Commodities & Derivatives Exchange Ltd (NCDEX). PXIL received regulatory approval from Central Electricity Regulatory Authority (CERC) on September 30, 2008 to begin operations and PXIL successfully began its operations on October 22, 2008. The total volume of power traded on PXIL amounted to 112.32 million units in October, 2010 (Source: http://www.cercind.gov.in/2010/MMC/MMC_Monthly_Report_Oct_2010.pdf).

PROVIDERS OF FINANCE TO THE POWER SECTOR IN INDIA

The primary providers of power sector financing in India are power sector specific government companies, financing institutions, public sector banks and other public sector institutions, multilateral development institutions and private banks.

Power-Sector Specific Government Companies


Besides our Company, the other sector-specific companies engaged in power sector financing are as follows:

Power Finance Corporation Limited


In order to provide funds for the power projects in India and to act as developmental financial institution for the power sector in India, PFC was incorporated on July 16, 1986. PFC is a Public Sector Undertaking and its main objective is to raise resources from international and domestic sources at competitive rates and terms and conditions and on-ward lend these funds on op basis to the power projects in India. PFC has been actively persuading State

Governments to initiate reform and restructuring of their power sector in order to make them commercially viable and in this regard, is providing financial assistance to reform-minded States under relaxed lending criteria/exposure limit norms. It is also providing funds based services like Term Loans, Equipment Leasing, Bill Discounting, Buyers Line of Credit and also non funds based services like Guarantee Services and Consultancy Services.

Rural Electrification Corporation


The Rural Electrification Corporation (REC) was incorporated on July 25, 1969 under the Companies Act. REC is a wholly owned Government enterprise and its main objective is to finance and promote rural electrification projects throughout India. It provides financial assistance to SEBs, state government departments and rural electric cooperatives for rural electrification projects. REC also promotes and finances rural electricity cooperatives; administers funds and grants from the GOI and other sources for financing rural electrification; provides consultancy services and project implementation in related fields; finances and executes small, mini and micro generation projects; and develops other energy sources.

Indian Renewable Energy Development Agency Limited


The Indian Renewable Energy Development Agency Limited (IREDA) was incorporated on March 11, 1987 as a public sector NBFC under the administration of the Ministry of NonConventional Energy Sources with the objective of promoting, developing and extending financial assistance for renewable energy and energy efficiency, and energy conservation projects. IREDA plays a key role in the development of renewable energy in India.

Financial Institutions
Financial institutions were established to provide medium-term and long-term financial assistance to various industries for setting up new projects and for the expansion and modernization of existing facilities. These institutions provide fund based and non-fund based assistance in the form of loans, underwriting, direct subscription to shares, Bonds and guarantees. The primary long-term lending institutions include IDFC Limited, IIFCL Limited, IFCI Limited, and Industrial Investment Bank of India Limited and Small Industries Development Bank of India.

State Level Financial Institutions


State financial corporations operate at the state level and form an integral part of the institutional financing system. State financial corporations were set up to finance and promote small and medium sized enterprises. At the state level, there are also state industrial development corporations, which provide finance primarily to medium-sized and large-sized enterprises.

Public Sector Banks and other Public Sector Institutions


Public sector banks make up the largest category of banks in the Indian banking system. The primary public sector banks providing finance to the power sector include the IDBI Bank Limited, State Bank of India Limited, Punjab National Bank and the Bank of Baroda. Other public sector entities such as the Life Insurance Corporation of India, India Infrastructure Finance Company Limited, etc. are also providing financing to the power sector.

Private Sector Banks


After the first phase of bank nationalization was completed in 1969 the majority of Indian banks were public sector banks. Some of the existing private sector banks, which showed signs of an eventual default, were merged with state owned banks. In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, the RBI permitted entry by the private sector into the banking system. This resulted in the introduction of nine private sector banks. These banks are collectively known as the ''new'' private sector banks. These institutions also provide fund based and non-fund based assistance in the form of loans, underwriting, direct subscription to shares, Bonds and guarantees and also compete in the power sector.

Infrastructure Finance Companies


IFCs are a new category of infrastructure funding entities introduced by the RBI in February 2010. Non-deposit taking NBFCs which satisfy the following conditions are eligible to apply to the RBI and seek the IFC status:

million;

rating by any other accrediting rating agencies; and

IFCs enjoy benefits including a lower risk weight on their bank borrowings (from a flat 100.0% to as low as 20.0% for AAA-rated borrowers), higher permissible bank borrowing (up to 20.0% of the banks net worth as against 15%. for an NBFC that is not an IFC), access to external commercial borrowings (up to 50.0% of owned funds on an automatic basis) and relaxation in their single party and group exposure norms. IFCs are also eligible for issuance of infrastructure bonds. These benefits should enable a highly rated IFC to raise more funds, of longer tenors and at lower costs, and in turn lend more to infrastructure companies.

International Development Financial Institutions


International development financial institutions are supportive of power sector reform and of more general economic reforms aimed at mobilizing investment and increasing energy

efficiency. The primary international development financial institutions involved in power sector lending in India include several international banking institutions such as Japan Bank for International Cooperation, Kreditanstalt fur Wiederaufbau, the World Bank, the Asian Development Bank and the International Finance Corporation. In the early 1990s, the World Bank decided to finance mainly projects in states that demonstrate a commitment to implement a comprehensive reform of their power sector, privatize distribution, and facilitate private participation in generation and environment reforms. Recent loans from the World Bank have gone to support the restructuring of SEBs. In general, the loans are for rehabilitation and capacity increase of the transmission and distribution systems, and for improvements in metering the power systems in states that have agreed to reform their power sector. The overall strategy of the Asian Development Bank for the power sector is to support restructuring, especially the promotion of competition and private sector participation. Like the World Bank, the ADB also provides loans for restructuring the power sector in the states and improving transmission and distribution.

Other Provisions for Power Sector Finance


There also exist several short term and long-term financing measures by the GoI to facilitate the financial viability of the power sector, such as the implementation of the Electricity Act. As a longterm financing measure, the process has been initiated for institutionalizing mechanism for facilitating and accelerating private and foreign direct investment into the power sector.

CAPITAL STRUCTURE OF THE COMPANY


Share Capital Amount in Rs. Authorised 1,000,000,000 equity shares of Rs. 10/- each 10,000,000,000 Total 10,000,000,000 Issued, Subscribed and Paid up 434,583,335 equity shares of Rs. 10/- each 4,345,833,350

Date of Allotment

No. of Equity Shares

Face Value

Consideration

Remark

November 30, 2006 Noember 30, 2006 May 25, 2007 January 31, 2008

3,000,006

Cash

Allotted to PTC India Ltd at par

1,000,000

Cash

Allotted to PTC India Ltd at par

50,000,000

10

Cash

Allotted to PTC India Ltd at par

36,000,004

10

Cash

18,000,002 equity shares each allotted to G S Strategic Investments Ltd and Macquarie India Holdings Limited at a premium of Rs. 6 per equity share

April 10, 2008

153,333,324 10

Cash shares allotted to PTC India Ltd atpar.

shares each allotted to G S Strategic Investments Ltd and Macquarie India Holdings Limited at a Premium of Rs. 6 per equity share. March 30, 2009 191,250,001 10 Cash share allotted to PTC India Ltd at par. equity shares allotted to PTC India Ltd at a premium of Rs. 6 per equity share.

v. Details of other borrowings including any other issue of debt securities in past Details of Long Term outstanding Borrowings as per audited financial accounts on September 30, 2010.

Nature of Debts

Sanctioned Rs. in MM

Outstanding Rs. in MM

SECURED BORROWINGS Long Term Loans Short Term Loans Non Convertible Bonds Total Secured 5,250.00 346.58 2,000.00 7,596.58 2,373.69 346.58 2,000.00 4,720.27

UNSECURED BORROWINGS

Short Term Loans Short Term Loans

500.00 500.00

500.00 500.00

vi. Any material event/ development or change at the time of issue or subsequent to the issue which may affect the issue or the investors decision to invest/ continue to invest in the debt securities The Company hereby declares that there has been no material event, development or change at the time of issue which may affect the issue or the investors decision to invest/ continue to invest in the debt securities of the Company.

vii. Particulars of the debt securities issued (i) for consideration other than cash, whether in whole or part, (ii) at a premium or discount, or (iii) in pursuance of an option The Company confirms that other than and to the extent mentioned elsewhere in this Disclosure Document, it has not issued any shares or debt securities or agreed to issue any shares or debt securities for consideration other than cash, whether in whole or in part, at a premium or discount or in pursuance of an option since inception

viii. A list of highest ten holders of each class or kind of securities of the issuer as on the date of application along with particulars as to number of shares or debt securities held by them and the address of each such holder. a) List of top ten largest equity shareholders of the Company as on September 30, 2010

Sr. No.

Name of the Shareholder

No. of Shares

% of Equity Capital

PTC India Ltd*

337,250,001

77.60

G S Strategic Investments Ltd

48,666,667

11.20

Macquarie

48,666,667

11.20

India Holdings Limited Total 434,583,335 100.00

b) List of top ten / maximum available Banks/Bond Holders of the Company as on September 30, 2010:

Sr. No.

Name of Banks

Long Term Loan (Rs. in million)

Corporation Bank (Long Term Loan)

1,000.00

Punjab National Bank (Long Term Loan)

545.80

Union Bank of India (Long Term Loan)

318.72

4 5

Indian Bank (Long Term Loan) Oriental Bank of Commerce (Long Term Loan)

254.72 254.45

Sr. No.

Name of Bank/FI/other lenders

NCD (Rs. in million)

Templeton India Short-Term Income Plan

1,000

2 3 4

MTNL Gratuity Trust Parle Biscuits Pvt Ltd Hooghly District Central Co-Operative Bank Limited

150 100 50

5 6 7

Urvashi D Morarji Rajkot Nagrik Sahakari Bank Ltd Telecommunication Consultants India Limited

50 50 33

Employees Provident Funds Trust 8 APSCSC Employees Provident Fund Trust 9 Wallace Flour Mills Co Pvt Ltd 30 30

ix. An undertaking that the issuer shall use a common form of transfer. The Bonds shall be transferred subject to and in accordance with the rules/ procedures as prescribed by the NSDL/ CDSL/ Depository Participant of the transferor/ transferee and any other applicable laws and rules notified in respect thereof. The normal procedure followed for transfer of securities held in dematerialized form shall be followed for transfer of these Bonds held in electronic form. The seller should give delivery instructions containing details of the buyers DP account to his depository participant. The transferee(s) should ensure that the transfer formalities are completed prior to the Record Date. In the absence of the same, interest will be paid/ redemption will be made to the person, whose name appears in the records of the Depository. In such cases, claims, if any, by the transferee(s) would need to be settled with the transferor(s) and not with the Company. The Company undertakes that it shall use a common form/ procedure for transfer of Bonds issued under terms of this Disclosure Document.

AUTHORITY FOR THE ISSUE


This private placement of Bonds is being made pursuant to the resolutions of the Board of Directors of PFS passed at its meeting held on March 22, 2010 and Committee of Directors for issuance of Bond in its meeting held on January 27, 2011. The current private placement of Bonds is within the overall borrowing limits of the Company.

SECURITY
The Bonds together with interest, trustees remuneration, charges, expenses and all other monies payable in respect thereof shall be secured by a First charge on the receivables of the assets created from the proceeds of current Bond issue and other unencumbered receivables of the Company to provide the 100% security coverage, during the currency of the current Bond Series 1 of Company. The said security shall be created in favour of the Trustees within 3 (three) months from the Date of Closure of the proposed Issue or such extended period as may be permitted by the relevant authority(ies). The security will be created by the Company as

aforesaid in favour of the Trustees on such of the assets for which the Company obtains, after all due diligence and efforts, the requisite consents and permissions applicable under laws or in accordance with conditions of holding of such assets for creating the above mentioned charge. The creation of such security shall be sufficient compliance of the Companys obligation to create security. On creation of the final security, the Bonds will have a security cover of not less than 100% of the total amount outstanding on the Bonds Series 1. The Trustee shall have the power to substitute or release any property charged in its favour without approval of the Bond holders.

Conclusion
This Information Memorandum is not intended to form the basis of evaluation for the potential investors to whom it is addressed and who are willing

and eligible to subscribe to these Infrastructure Bonds issued by PFS. This IM has been prepared to give general information regarding PFS to parties proposing to invest in this issue of Infrastructure Bonds and it does not purport to contain all the information that any such party may require.

As required, a copy of this Disclosure Document has been submitted to the National Stock Exchange of India Ltd.

The Company operates in a highly competitive, regulated and ever-changing business environment, and a change in any of these variables may necessitate

an alteration of the Companys plans.

The Bonds are proposed to be listed on NSE.

In respect of Bonds with buyback option, exit facility shall be available at the end of 5th, 6th, 7th, 8th and 9th year.

If any proposal affecting the rights attached to the Bonds is considered by PFS, the said proposal will first be placed before the registered Bondholders or Trustees for their consideration.

The Bonds cannot be pledged or hypothecated for obtaining loans from scheduled commercial banks during the Lock-in Period of five years.

Taxability of interest on Bonds would depend upon the method of accounting adopted by the Resident Bondholder as mentioned in the provisions of the IT Act.

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